RNS Number : 9232D
Brooks Macdonald Group PLC
12 September 2024
 

12 September 2024

 

BROOKS MACDONALD GROUP PLC

 

Final results for the year ended 30 June 2024

 

Focusing on clients to reignite growth

 

Brooks Macdonald Group plc ("Brooks Macdonald" or "the Group") today announces its audited results for the year ended 30 June 2024, which show a rise in funds under management, a double-digit increase in underlying profit before tax, a strong capital and cash position and the nineteenth successive annual dividend increase for the Group. Also released today are two further announcements regarding the disposal of the International business and appointment of the new CFO.

 


Oval: Funds under Management £18.0bn +7.0% 2023: £16.0 bn
 



Andrew Shepherd, CEO of Brooks Macdonald, said:

"Despite the challenging market conditions, we have delivered good results, with our Funds Under Management growing to £18.0 billion and having maintained strong underlying profit margins. This performance is a testament to our robust business model and the unwavering commitment of our people. I want to thank the entire team at Brooks Macdonald for their hard work, dedication, and resilience throughout this past year and indeed during the three years of my tenure as CEO. As I hand over the reins to Andrea Montague, who has already made a significant impact as CFO, I have every confidence that she will lead Brooks Macdonald to even greater success as CEO."

Andrea Montague, CEO Designate of Brooks Macdonald, said:

"Over the last 12 months, I have been impressed with the deep client relationships that we have at Brooks Macdonald as well as the expertise and commitment of our people to our clients. To be the best, we know there is more we can do. Today we are redefining our strategy to reignite growth with a renewed focus on excellent client service, broadening and deepening our client reach and exploring targeted opportunities to drive scale and efficiencies. We are also simplifying the Group by announcing the sale of our International business for a total consideration of up to £50.85 million.

 

"I announced this morning the appointment of Katherine Jones as our new Chief Financial Officer.  This appointment will strengthen my leadership team so we can continue to drive performance and execute our strategy. Looking ahead, I am hugely excited about what we can achieve as we unlock the full potential of Brooks Macdonald."

 

Good financial performance and strategic progress

·     Group Funds Under Management ("FUM") reached £18.0 billion (FY23: £16.8 billion), up 7.0% on prior year reflecting a strong investment performance:

Gross inflows totalled £2.3 billion (FY23: £2.7 billion) reflecting strong client demand with the fourth quarter showing an improvement on each of the prior quarters of the financial year

Gross outflows in the year were elevated, driven by the macroeconomic backdrop and higher interest rate environment leading to net outflows of £0.6 billion (FY23: net inflows of £0.8 billion)

Performance in absolute terms over the 10-year period, across all our risk profiles, is very strong delivering a range of +30% (for low risk) through to +97% for our highest risk strategy (all net of fees).  

The last 12 months to the end of June 2024 has seen this outperformance compared to peers cemented. All 5 risk profiles have delivered outstanding absolute returns for clients and outperformed the ARC Private client index series.

·     Revenue of £128.3 million (FY23: £123.8 million), up 3.6% driven by increased transactional and FX income, and the full year contribution from the financial planning businesses acquired part way through FY23

 

·     Management actions realised annualised cost savings of £4.0 million through organisational changes resulting in broadly flat underlying costs for the year

 

·     Underlying profit1 of £34.1 million (FY23: £30.3 million), up 12.5% and an improved underlying profit margin of 26.6% (FY23: 24.5%).

 

·     Total dividend up 4.0% to 78.0p (FY23: 75.0p) reflecting the Board's confidence in the Group's medium-term growth strategy. This is the nineteenth successive annual dividend increase since shares began trading on AIM

 

·     Sale of Brooks Macdonald International (BMI) to Canaccord Genuity Wealth Management for a total consideration of up to £50.85 million, including an initial consideration of £28 million payable in cash upon completion.

 

Key financial results

 

Year ended

30.06.2024

Year ended

30.06.2023

Change

FUM and Revenue

 

 

 

Funds under management ("FUM")

£18.0bn

£16.8bn

7.0%

Net flows growth rate

(3.7)%

5.2%

(8.9)ppt

Revenue

£128.3m

£123.8m

3.6%

 

Underlying results1

Profit before tax

£34.1m

£30.3m

12.5%

Profit margin before tax

26.6%

24.5%

2.1ppt

Basic earnings per share

163.8p

153.8p

10.0p

Diluted earnings per share

161.0p

151.0p

10.0p

 

Statutory results

Profit before tax

£11.6m

£22.2m

(47.7)%

Profit margin before tax

9.0%

17.9%

(8.9)ppt

Basic earnings per share

40.1p

114.7p

(74.6)p

Diluted earnings per share

39.4p

112.6p

(73.2)p

 

Capital

Net cash2

 

 

£44.7m

 

 

£53.4m

 

 

(16.3)%

Own Funds adequacy ratio

348.5%

328.1%

20.4ppt

 

Dividends

Proposed final dividend per share

49.0p

47.0p

4.3%

Total dividend per share

78.0p

75.0p

4.0%

 

1The underlying figures represent the results for the Group's continuing activities excluding certain adjusting items as listed in the Financial Review. These represent an alternative performance measure for the Group. A reconciliation between the Group's statutory and underlying profit before tax is also included in the Financial Review.

2During the year, the Group invested £30 million of surplus cash resources into UK Gilts which are held on the balance sheet as financial assets held at amortised cost.

 

Redefining our Strategy and setting medium-term targets

We plan to reignite growth through a renewed focus on:

1. Delivering excellent client service:

unlock the full potential of Brooks Macdonald's client-centric culture;

proactively tailor our service to client needs; and,

launch differentiated and innovative new products to further drive business growth.

 

2. Broadening and deepening our client reach

take the Group's broad product range to our existing network and build new connections;

increase brand awareness; and,

enhance client data management and analytics to support lead generation.

 

3. Driving scale and efficiencies:

build talent and execution capabilities to support delivery of client service;

leverage automation across front-office and support teams to increase productivity; and,

optimise investment and client reporting processes to improve efficiency.

 

As a result of this strategy, we announce today the following medium-term targets:

·     5% annualised net inflows

·     underlying cost growth of less than 5% per annum

 

Successful Execution of M&A strategy

The completion of the following transaction will progress our strategy to reignite growth and create a simplified wealth management and financial planning business in the UK:

·     Following a strategic review of Brooks Macdonald International (BMI), the Board concluded that a sale of the business was in the best interests of the Group. The separately announced sale to Canaccord Genuity Wealth Management for a total consideration of up to £50.85m which includes initial consideration of £28 million payable in cash upon completion, with additional contingent consideration of up to £22.85 million payable on the second anniversary of completion, subject to meeting certain revenue targets and secures a highly credible future owner for BMI.

Update on regulatory matters

·     Regarding the FCA's review of ongoing advice: the Group undertook a review of historical data and practices in the second half of the financial year and consequently, the Board concluded no provision was required.

·     Consumer Duty: the Group fully supports the principles of Consumer Duty and completed its first annual Consumer Duty Board report in the year.  

We continue to have a constructive, ongoing dialogue with all of our regulators and remain committed to delivering excellent outcomes for all of our clients.

FY25 Guidance and Outlook

The structural growth opportunity in our industry remains highly attractive, underpinned by demographics, government policy and increasing need for advice. This, coupled with an improving economic outlook gives us strong confidence in delivering the strategy we have announced today.

As a result, we anticipate a return to overall positive net flows later in the financial year. We continue to expect to see the blended revenue yield follow its established trend as our Platform MPS business continues to grow at pace, which will drive operational leverage through the business.

The BMI transaction is subject to regulatory approval with anticipated completion by March 2025 and an impact of c £2m on group underlying profit in FY25.

As we guided at the half year, H224 interest income was in line with our guidance at £5m. Following on from that, we expect interest income to be impacted by further BOE base rate reductions. For FY25, we expect client interest turn to be c. £7-8m.

We continue to actively manage our costs and drive efficiencies to ensure we are well-positioned for future growth.

We expect capital expenditure to average £4-5m in FY25.

 

Conference call and investor presentation details

A video presentation and results presentation slides will be available from 7:00 a.m. today on the Investor Relations section of Brooks Macdonald's website using the following link:

https://www.brooksmacdonald.com/investor-relations

 

There will be a Q&A session for analysts and investors at 9:30 a.m. today via conference call.

For details please contact FTI Consulting on +44 (0) 07976 870961 or brooksmacdonald@fticonsulting.com

 

Enquiries to:

Brooks Macdonald Group plc

Andrea Montague, CEO Designate and CFO

 

www.brooksmacdonald.com

Andrea.Montague@brooksmacdonald.com

Singer Capital Markets (Nominated Adviser and Broker)

Charles Leigh-Pemberton / James Moat

 

+44 (0) 20 7496 3000

 

 

Investec Bank (Joint Broker)

Christopher Baird / David Anderson

 

+44 (0) 20 7597 5970

FTI Consulting

Edward Berry/Katherine Bell

 

brooksmacdonald@fticonsulting.com

07703 330199/07976870961

Notes to editors

Brooks Macdonald Group plc, through its various subsidiaries, provides leading wealth management services in the UK and internationally. The Group, which was founded in 1991 and began trading on AIM in 2005, had discretionary Funds under Management of £18.0 billion as at 30 June 2024.

Brooks Macdonald offers outsourced discretionary investment management for intermediaries and advice-led integrated wealth management for private clients. The Group also acts as fund manager to a range of onshore and international funds.

The Group has a strong local presence across the UK and Crown Dependencies.

 

The information contained within this announcement was previously deemed by the Company to constitute inside information as stipulated by Market Abuse Regulation (EU) No 596/2014 ("EU MAR") and the retained UK law version of EU MAR pursuant to the Market Abuse (Amendment) (EU Exit) Regulations 2019 (SI 2019/310) ("UK MAR"). With the publication of this announcement via a Regulatory Information Service, this information is now considered to be in the public domain. For the purposes of UK MAR, the person responsible for arranging for the release of this information on behalf of Brooks Macdonald is Company Secretary Phil Naylor.

 

 

Forward-looking statements

This announcement may include statements, beliefs or opinions that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements contained in the announcement speak only as of their respective dates, reflect Brooks Macdonald's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Brooks Macdonald's business, results of operations, financial position, liquidity, prospects, growth and strategies.

Except as required by any applicable law or regulation, Brooks Macdonald expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement or any other forward-looking statements it may make whether as a result of new information, future developments or otherwise.

 

LEI: 213800WRDF8LB8MIEX37

www.brooksmacdonald.com / @BrooksMacdonald

 

 

Chair's statement

Focus on reigniting growth

I am delighted to present my first Annual Report as your new chair. I have spent recent months getting to know Brooks Macdonald and I have great first impressions. In particular, our client-centric culture - the service and commitment we provide to clients and advisers is exemplary, together with the strength of our relationships and the calibre of our people. I have also met shareholders, corporate advisers and competitors, and have gained a good understanding of Brooks Macdonald, and it's position in the UK wealth market.

Brooks Macdonald is an excellent business that serves a critical need for individual saving and investment. The structural opportunity for our industry remains strong and we are well positioned to help clients navigate all market conditions. We will continue to focus on delivering consistently good investment returns for our clients and partners.  

The Group delivered good financial results in the year to 30 June 2024. Underlying PBT increased by 12.5% to £34.1m, with our results reflecting the resilience of our business model and the added value of the services we provide. The financial review in this Annual Report contains detailed information on our performance.

Since our financial year end, the Bank of England ("BOE") has cut the interest base rate for the first time since the aggressive hikes that started late 2021 to stave off soaring inflation. As macroeconomic conditions stabilise, we are confident that our business is well positioned to benefit, with clients being more likely to commit funds for long-term investment. As a Board, we are focused on implementing our strategy and achieving the goals we have set for the Group.

Enhancing our strategy

We have set out our strategy to reignite growth with a renewed focus on:

•    Delivering excellent client service

•    Broadening and deepening client reach

•    Driving scale and efficiencies

By focusing on these growth levers, which include enhancing our technology, scaling our products and being more data-led, and by carrying out targeted M&A (using strict criteria) we are confident that we will achieve the new medium-term targets that we have set. We recognise that we need to improve our flows, to attract new clients and to retain existing clients, and are committing to a medium-term target of 5% net inflows per annum. However, we also recognise the importance of doing this efficiently and will limit underlying cost growth to less than 5% per annum.

Our tailored distribution, to advisers and direct to clients, and our broad proposition set that meets clients' needs throughout their entire investment lifecycle give us an excellent base from which to grow. With an enhanced focus on our refined strategy, I look forward to seeing BM delivering enhanced returns for all our stakeholders.

Dividend

The Board has recommended a final dividend of 49.0p (FY23: 47.0p), which, subject to approval by shareholders, will result in total dividends for the year of 78.0p (FY23: 75.0p). This represents an increase of 4.0% in the total dividend on the previous year and underlines the Board's confidence in the prospects for the Group. The final dividend will be paid on 1 November 2024 to shareholders on the register at the close of business on 20 September 2024.

We have increased our dividend each year for 19 years, demonstrating the capital strength of our business through the cycle and our commitment to shareholder returns.

Governance

In March 2024, following a nine-year term on the Board, Richard Price stepped down after various positions including Chair of the Audit Committee, Senior Independent Director and Acting Chair. I would like to thank Richard for the significant contribution he made to Brooks Macdonald and for leaving the Group in a strong position.

In June this year, we announced that CEO, Andrew Shepherd will be retiring after 22 years with the Group. From 1 October 2024, our Chief Financial Officer, Andrea Montague, will be appointed as CEO, subject to regulatory approval. Andrea has been working closely with Andrew since this announcement and has been in position as CEO Designate since 1 July 2024. I am confident of a smooth handover and that Andrea's demonstrated experience, pace and leadership stand her in excellent stead to deliver our ambitious growth plans.

I would like to take this opportunity to reiterate the gratitude of the Group to Andrew for the immense contribution he has made to Brooks Macdonald during his tenure as CEO and for the many years before. He has shown extraordinary dedication and commitment to the Group. We will miss 'Shep' and wish him all the best in the future.

Culture and colleagues

Our people are our greatest strength and we are focused on developing them to be the best they can be. Throughout the year, we have evolved our People strategy to increase leadership and management capability, to drive high performance and to improve the employee experience. Each of these is underpinned by our 'Inclusive by Design' strategy which challenges us to ensure we adopt an inclusive approach to everything that we do, in turn fostering a culture that inspires motivation and engagement from our workforce.

In July this year, we conducted a 'Speak-up' employee engagement survey and had a participation rate of 79%. We saw improved scores in Performance Management and Fulfilling Careers with employees commenting positively on our culture of continuous improvement. Based on this survey, we provide each business area with a report to enable managers to address specific needs of their teams. The Board and the Executive leadership team will ensure that we make Brooks Macdonald an even better place to work by implementing changes suggested by our people.

Looking ahead

Demographics in the form of an ageing population continue to underpin the strategic opportunity for Brooks Macdonald. With an ambitious new government in place we must hope that dis-incentivising pension savings does not become a new source of funding for the various state spending plans. The high inflation stress seems to be behind us and a first BOE base rate reduction bodes well for the clients of wealth managers. The bank of mum and dad alongside the temptation of debt reduction has been and remains tough competition for wealth managers, but with further rate cuts on the horizon, prospects are looking up for long-term investment strategies as offered by Brooks Macdonald. Under Andrea's leadership our redefined strategy, coupled with a strong balance sheet and robust cash generation will ensure we continue to be well positioned for the future. Finally I would like thank our shareholders for their continued support, our colleagues for their hard work and our clients and partners for their business and trust in our organisation.

Maarten Slendebroek
Chair
11 September 2024

 

 

CEO's review

As I present my final review as CEO of Brooks Macdonald, I reflect on the immense pride I have felt in holding this position. Brooks Macdonald is a great business that delivers excellent outcomes for our clients across their entire investment lifecycle. By generating consistently strong investment returns to support their long-term financial goals, we provide them with increased certainty and reassurance over their financial futures, regardless of the economic backdrop.

Throughout my tenure as CEO, we have remained focused on our Purpose of realising ambitions and securing futures, which means we keep our clients at the forefront of our minds, whilst also providing for all our stakeholders - employees, intermediaries and shareholders.

This year has been no different. Clients have benefitted from the close relationships with our investment managers and financial planners which is even more important when markets are challenging, and have further benefitted from strong returns from our rigorous investment process.

Financial performance

For much of our financial year, inflation remained high, together with persistently high interest rates. Clients remained under pressure in terms of higher costs of living and continued to be encouraged to pay down increasingly expensive debt. These factors impacted our industry and our Group, where we saw net outflows of £616 million, largely in our Bespoke and Funds products. MPS continued to be a driver of growth with net inflows of £388 million, reflecting the trend for MPS as a solution of choice for accumulation.

Gross inflows across our propositions were strong throughout the year, with £2.3 billion gross inflows at the Group level and we ended the year with the best-performing quarter. Platform MPS gross inflows contributed approximately half of these flows. Although outflows were stubbornly high, we saw signs of improvement in the fourth quarter. Given our internal efforts on client retention, combined with a more stable economic outlook, we are confident that outflows will decrease.

We had a year of good financial performance in FY24, with underlying profit before tax increased to £34.1 million (FY23: £30.3 million). The underlying profit margin increased by 2.1 percentage points to 26.6% as we implemented cost efficiencies and benefited from increased interest and transactional income. Statutory profit before tax fell to £11.6 million from £22.2 million, primarily due to the impairment of the International goodwill balance announced in our half-year results.

Our year-end closing FUM was a record £18.0 billion, up 7% in the year, with investment performance of £1.8 billion more than offsetting the impact of net outflows.

Investment performance and market conditions

Our aggregate investment performance across all our risk profiles for the year was 10.7%. These strong returns have been generated through our robust Centralised Investment Proposition where we have constructed portfolios with a balanced approach utilising multiple asset classes and investment vehicles against a backdrop that has seen headline index returns dominated by a focussed set of large and mega cap stocks.

During the second half of the year, we saw an improvement for UK companies benefitting from better sentiment, signs of political stability and economic improvement. Our clients continued to benefit from our rigorous investment process, which provides diversified portfolios for their long-term investment horizons. Our investment strategies outperformed their relevant ARC peer group indices for the year and maintained strong results over the 10-year period.

Looking ahead, we are encouraged by the recent falls in inflation and anticipate interest rate cuts across Western economies that should be supportive of asset prices. Additionally, the change in government in the UK is seen to encourage international asset allocators to review exposure to the region.

We are retaining our slight overweight position to equity markets but maintaining our balance between value and growth investment styles as we recognise diversification as critical in the current uncertain outlook.

Review of business performance

UK Investment Management

Across UK Investment Management ("UKIM"), our people have once again worked incredibly hard to provide exceptional levels of support to their clients and intermediaries resulting in strong gross inflows of £2.0 billion in the year.

The Platform Managed Portfolio Service ("PMPS") was the strongest performer, achieving net inflows of approximately £330 million for the year. This reflects both the robust current and potential growth of this product at Brooks Macdonald and within the broader industry.

BM Investment Solutions ("BMIS"), our business-to-business offering, collaborates with adviser firms to provide tailored services aligned to their objectives. Once again, BMIS demonstrated good performance, achieving net inflows of approximately £140 million.

In our Bespoke Portfolio Service ("BPS") product, UKIM has experienced significant growth in our specialist offerings - Responsible Investing Service, Decumulation, and Court of Protection, and especially with our Gilts product which was introduced to meet client demand for their portfolios to take advantage of higher interest rates whilst avoiding equity risk. However, beyond these specialist offerings, BPS saw net outflows due to a broader market trend, compounded by the impact of higher interest rates and macroeconomic uncertainty.

Despite our funds business facing challenges this year, with net outflows similar to much of the sector, we remain optimistic about the potential for growth in our multi-asset funds. We are confident in the actions we have already taken to drive medium-term growth and are actively reviewing additional steps to further strengthen our position.

International

In our interim results in March 2024, we announced a strategic review of the International business following performance that had been behind plan. I would like to thank the International team for their unwavering commitment during this time. We conducted a thorough review aimed at determining how to maximise value from the business. It has been concluded that the sale of the International business is in the best interests of the Group as it simplifies the Group's operations to focus on its core activities of high-quality investment management and financial planning within the UK.

Distribution

We operate in a significant and growing market and have traditionally leveraged our relationships with advisers to distribute our products. In recent years we have recognised the growing opportunity in distributing direct to clients, especially where we have a financial planning relationship. As at 30 June 2024, the Group had £5.3 billion Funds under Management or Advice ("FUM/A") with private clients who deal with the Group directly. £4.5 billion related to portfolios in the Group's investment management and £0.8 billion to portfolios with third-party investment managers.

We made two senior appointments to newly created roles in the year to reflect this targeted distribution with Alex Charalambous joining the Group as Head of Wealth and, since year end, Greg Mullins joining as Head of Adviser Solutions. Alex is leading the Group's advice-led integrated wealth management offering for private clients and Greg will focus on delivering exceptional service to the adviser community, both supporting our ambitious growth plan.

Investing in our people

Our commitment to a strong people agenda has been unwavering, and our client-centric culture continues to be one of our most valuable assets. This year, we have deepened our investment in our people, bringing in talented new hires and enhancing our team's capabilities. We have made significant strides in our people strategy by advancing management training programmes, expanding professional development opportunities, and refining our performance management approach. These efforts are complemented by regular employee feedback, which we use to continuously improve our processes and ensure they align with the needs of our people.

Leadership transitions are a critical moment in any organisation, and in June 2024, I announced my resignation alongside the Board's decision to appoint Andrea Montague as our new CEO, effective 1 October 2024, subject to regulatory approval.

As Chief Financial Officer since August 2023, Andrea has been a vital member of our leadership team. Her drive to redefine our strategy to reignite growth puts Brooks Macdonald in excellent hands and in a strong position for the future.

This financial year, we also undertook necessary organisational changes to ensure the Group's long-term competitiveness. These changes, which included a reduction in roles by approximately 10%, were difficult but necessary to align our resources with our strategic objectives. The resulting cost savings of approximately £4 million per annum have strengthened our commercial position and enhanced our ability to compete effectively in the market.

Employee wellbeing remains at the forefront of our agenda, particularly during times of change. We continue to support our people through various initiatives, including enhanced employee assistance programmes, mental health support, and professional development opportunities. Our goal is to foster an environment where every employee can thrive, both personally and professionally.

Andrew Shepherd
CEO
11 September 2024

 

 

Our strategy

Brooks Macdonald has redefined its strategy to take advantage of the growth opportunities in the UK wealth management sector. We have strong foundations in place and we continue to make substantial progress. Although persistently high interest rates have made the short term difficult, the longer-term outlook for the business is excellent.

Reigniting growth

Brooks Macdonald was founded to give clients wealth management driven by purpose and principles, and that remains as true as ever.

We have multiple stakeholders - clients always come first, and if we look after our clients, our employees, and our intermediaries, then our shareholders will get the returns they seek. For all of them, the reason Brooks Macdonald is here is to help them realise their ambitions and secure their futures.

We work every day to protect and enhance our clients' wealth through high-quality investment management and financial planning, underpinned by exceptional client service.

We are dedicated to the highest professional standards, inspired by our guiding principles: we do the right thing, we are connected, we care, and we make a difference. We are proud of the powerful blend of talented people we have in Brooks Macdonald, and together we are confident and ambitious in what we can achieve and the difference we can make for our clients.

Focused distribution

We have aligned our business around our two key distribution channels - financial advisers and private clients. Our proposition is different in the two channels - outsourced discretionary investment management for advisers, in our Adviser Solutions unit, and integrated wealth management for private clients in our Wealth team. Aligning the organisation to the needs of the different propositions is helping make us more effective and efficient in serving our clients and advisers.

Strategic priorities

Our strategy is grounded in three key areas, each with a number of principal initiatives for 2025.

1. Delivering excellent client service

We aim to unlock the full potential of Brooks Macdonald's client-centric culture, proactively tailor our service to client needs and launch differentiated and innovative new products to further drive business growth.

2. Broadening and deepening our client reach

We will focus on taking the Group's broad product range to our existing network and new connections, increase brand awareness and, enhance client data analytics to support lead generation.

3. Driving scale and efficiencies

We will focus on building talent and execution capabilities to support delivery of client service, leverage automation across the front-office and support teams to increase productivity and optimise investment and client reporting processes to improve efficiency.

Strategic progress in FY24

Following Consumer Duty 'go live' in July, we updated our Target Market Guide and published it on our website.

We continued to make incremental improvements to our client and adviser portal InvestBM.

We continued to align the advice process across our financial planning teams.

Gross inflows held up well in FY24 at 13.8%, despite persistent higher interest rates weakening investor sentiment.

Our Platform MPS product had net flows of c.13%.

We have continued to see positive net flows (c.22%) and FUM growth (27%) in our specialist BPS products, including Decumulation, Responsible Investment and Gilts.

We rebuilt our marketing function to align to the new distribution channel focus and to deliver high-quality marketing support to our distribution and front office teams.

We upgraded our capabilities with selective external hires in key functional areas, including Finance, HR, Risk and Compliance.

We experimented with generative AI to bring greater efficiency to internal processes and to build our understanding of what the technology can deliver.

 

 

Financial review

Review of results for the year

The Group delivered a good set of results for FY24, seeing growth in revenue and an improvement in underlying profit and underlying profit margin on the prior year.

The Group recorded net outflows in the year of £0.6 billion as a result of the challenging macroeconomic environment and the impact of higher interest rates prevailing during the year. These were offset by positive investment performance of £1.8 billion, leading to a record closing FUM of £18.0 billion at 30 June 2024 (£16.8 billion at 30 June 2023).

Revenue increased by 3.6% on the prior year to £128.3 million, and underlying profit was up 12.5% to £34.1 million, resulting in an underlying profit margin of 26.6% (FY23: 24.5%).

On a statutory basis, profit before tax was £11.6 million, down 47.7% from the prior year as a result of the previously communicated goodwill impairment charge recognised at 31 December 2023 of £11.6 million in relation to the International business.

Refer to the reconciliation between underlying and statutory profits section for details on the statutory adjustments, including the goodwill impairment.

Group financial results summary

Table 1 shows the Group's financial performance for the year ended 30 June 2024 with the comparative period and provides a reconciliation between the underlying results, which the Board considers to be an appropriate reflection of the Group's underlying performance, and the statutory results. Underlying profit represents an alternative performance measure ("APM") for the Group. Refer to the Non-IFRS financial information for a glossary of the Group's APMs, their definition, and the criteria for how underlying adjustments are considered.

 

Table 1 - Group financial results summary


FY24
£m

FY23
£m

Change

Revenue

128.3

123.8

3.6%

Fixed staff costs

(45.8)

(45.2)

1.3%

Variable staff costs

(12.8)

(10.9)

17.4%

Total staff costs

(58.6)

(56.1)

4.5%

Non-staff costs

(38.0)

(37.8)

0.5%

FSCS levy

(0.5)

(0.5)

-

Total non-staff costs

(38.5)

(38.3)

0.5%

Net finance income

2.9

0.9

222.2%

Total underlying costs

(94.2)

(93.5)

0.7%





Underlying profit before tax

34.1

30.3

12.5%

Underlying adjustments

(22.5)

(8.1)

177.8%

Statutory profit before tax

11.6

22.2

(47.7)%

Taxation

(5.2)

(4.1)

26.8%

Statutory profit after tax

6.4

18.1

(64.6)%





Underlying profit margin before tax

26.6%

24.5%

2.1ppts

Underlying basic earnings per share

163.8p

153.8p

10.0p

Underlying diluted earnings per share

161.0p

151.0p

10.0p

Statutory profit margin before tax

9.0%

17.9%

(8.9)ppts

Statutory basic earnings per share

40.1p

114.7p

(74.6)p

Statutory diluted earnings per share

39.4p

112.6p

(73.2)p

Own Funds adequacy ratio

348.5%

328.1%

20.4ppts

Dividends per share

78.0p

75.0p

4.0%

 

FUM movement in the year

The table below shows the opening and closing FUM position and the flows for the year broken down by segment and by the key services within UK Investment Management ("UKIM").

Table 2 - Movements in funds under management

Year ended 30 June 2024 (£m)


Opening


Organic net new business


Total inv. perf.


 

Closing


Total organic net new business

Total
mvmt

 

FUM
1 Jul 23


Q1

Q2

Q3

Q4

Total


FUM
30 Jun 24


BPS

8,527


(98)

(94)

(205)

(158)

(555)


908


8,880


(6.5)%

4.1%

MPS Custody

966


(14)

(21)

(20)

(25)

(80)


88


974


(8.3)%

0.8%

MPS Platform

3,489


147

121

65

135

468


410


4,367


13.4%

25.2%

MPS total

4,455


133

100

45

110

388


498


5,341


8.7%

19.9%

UKIM discretionary

12,982


35

6

(160)

(48)

(167)


1,406


14,221


(1.3)%

9.5%

Funds

1,708


(78)

(71)

(112)

(76)

(337)


174


1,545


(19.7)%

(9.5)%

UKIM total

14,690


(43)

(65)

(272)

(124)

(504)


1,580


15,766


(3.4)%

7.3%
















International

2,157


(27)

(33)

(22)

(30)

(112)


217


2,262


(5.2)%

4.9%
















Total

16,847


(70)

(98)

(294)

(154)

(616)


1,797


18,028


(3.7)%

7.0%





Total investment performance



10.7%

 

FUM increased by £1.2 billion or 7.0% during the year, to £18.0 billion at 30 June 2024 (30 June 2023: £16.8 billion). The Group's broad product offering and continued focus on serving clients in a changing economic environment has resulted in robust gross inflows of £2.3 billion for the year, however, gross outflows were elevated driven by the prevailing backdrop of market volatility and higher interest rates continuing to affect client behaviour, resulting in net outflows for the period of £0.6 billion.

Investment performance for the year added £1.8 billion to the closing FUM, representing an increase of 10.7%. Performance in absolute terms over the 10-year period, across all our risk profiles, is very strong delivering a range of +30% (for low risk) through to +97% for our highest risk strategy (all net of fees). 

The last 12 months to the end of June 2024 has seen this outperformance compared to peers cemented. All 5 risk profiles have delivered outstanding absolute returns for clients and outperformed the ARC Private client index series.

BPS experienced net outflows of £0.6 billion or 4.1% during the year, as clients withdrew funds to repay debt or to hold higher cash balances. The gilts offering launched at the end of the last financial year within the BPS product range saw strong demand, enabling clients to take advantage of higher interest rates whilst avoiding equity risk. Our Decumulation specialised product, offering a solution to meet clients' income requirements by shielding their portfolio from downturn in the early years of withdrawal, grew by 6.3% in the year.

Platform MPS, including the Group's B2B offering for financial advisers, BM Investment Solutions ("BMIS"), grew to £4.4 billion, an increase of 25.2%, with organic net flows contributing 13.4%.

Funds saw net outflows during the period, driven by the wider market conditions and in line with the trend observed across the sector.

International FUM grew moderately by 4.9% over the period with net outflows of £0.1 billion, offset by investment performance.

Revenue

Table 3 - Breakdown of the Group's total revenue


FY24
£m

FY23
£m

Change
%

Fee income

92.1

91.5

0.7%

Transactional and FX income

15.3

13.3

15.0%

Financial planning income

8.2

6.6

24.2%

Interest income

12.7

12.4

2.4%

Total revenue

128.3

123.8

3.6%

 

The Group's revenue for FY24 increased by 3.6% from £123.8 million to £128.3 million. Fee income was slightly up on last year to £92.1 million, driven by a combination of the impact from flows, product mix, and investment performance.

Transactional and FX income increased by 15.0% on the prior year due to higher trading volumes in the year and the impact of asset allocation strategies in response to the volatile market during the year.

Financial planning fees totalled £8.2 million in FY24, with an additional £1.8 million of revenue recognised in the current year from the full period impact of the Integrity Wealth Solutions Limited and Adroit Financial Planning Limited businesses acquired in FY23.

Interest income, net of increasing amounts paid out to clients on cash holdings, was up by £0.3 million to £12.7 million in the current year as a result of the continued rise in the Bank of England base rates during the year.

Table 4 - Revenue, average FUM and yields


Revenue

Average FUM

Yield

 

 

FY24
£m

FY23
£m

Change
£m

FY24
£m

FY23
£m

FY24
bps

FY23
bps

BPS fees

54.4

54.2

0.2

8,579

8,318

3.1

63.5

65.1

(1.6)

BPS non-fees (transactional income and FX fees)

12.2

10.4

1.8

-

-

-

14.2

12.5

1.7

BPS non-fees (interest income)

10.2

9.7

0.5

-

-

11.9

11.7

Total BPS

76.8

74.3

2.5

8,579

8,318

3.1

89.6

89.3

0.3

MPS Custody

5.8

5.7

0.1

972

967

0.5

59.2

59.1

0.1

MPS Platform

7.1

5.2

1.9

3,892

2,750

41.5

18.2

18.8

(0.6)

MPS non-fees (interest income)

1.2

1.1

0.1

-

-

11.9

11.7

Total MPS

14.1

12.0

2.1

4,864

3,717

29.0

32.3

UKIM discretionary

90.9

86.3

4.6

13,443

12,035

11.7

67.6

71.7

(4.1)

Funds

8.4

9.6

(1.2)

1,769

1,997

47.7

48.3

Total UKIM

99.3

95.9

3.4

15,212

14,032

8.4

65.3

68.4

(3.1)

International fees

15.6

16.1

(0.5)

2,215

2,198

0.8

70.4

73.3

(2.9)

International non-fees (transactional income and FX fees)

2.9

2.6

0.3

-

-

-

13.2

11.7

1.5

International non-fees (interest income)

1.4

1.6

(0.2)

-

-

6.2

7.2

Total International

19.9

20.3

(0.4)

2,215

2,198

89.8

92.2

Total FUM-related revenue

119.2

116.2

3.0

17,427

16,230

68.4

71.6

Financial planning income

8.2

6.6

1.6







Other income

0.9

1.0

(0.1)





Total non-FUM-related revenue

9.1

7.6

1.5





Total Group revenue

128.3

123.8

4.5





 

The Group's overall yield decreased by 3.2bps or 4.5% compared to the prior year. This was driven by a number of factors across the products set out below.

The yield on BPS fees for UKIM decreased by 1.6bps to 63.5bps during the year (FY23: 65.1bps), driven by the impact of flows, the underlying product mix and rates achieved on new business.

The BPS non-fee transactional and FX income yield increased by 1.7bps in the year, as a result of higher trading volumes. The yield on interest income was up 0.2bps, due to the increase of the Bank of England base rate in Q1, offset by higher amounts paid to clients.

The MPS Custody yield of 59.2bps continued to remain stable on FY23, whereas the yield on MPS Platform fell slightly by 0.6bps to 18.2bps due to the impact of product mix as Platform MPS includes our BM Investment Solutions offering that attracts relatively larger mandates and benefits from discounted tiered rates. Additionally, we saw growth in our passive Platform MPS offering during the year, which attract lower yields. This has resulted in the overall MPS yield decreasing from 32.3bps to 29.0bps in the year.

The UK Funds fee yields reduced by 0.6bps to 47.7bps during the year, primarily driven by the impact and timing of flows during the year.

International fee income yield reduced by 2.9bps to 70.4bps during FY24, driven by a change in product mix and the impact of flows. International non-fees transactional and FX income increased by 1.5bps, whilst interest income yield reduced by 1.0bp due to the impact of cash balances denominated in foreign currencies. This has resulted in the overall International yield decreasing from 92.2bps to 89.8bps during the year.

Underlying costs

Total underlying costs were broadly flat on last year, increasing marginally by 0.7% to £94.2 million in FY24 (FY23: £93.5 million). Excluding the full-year impact of the Integrity and Adroit businesses acquired part way through the prior year, underlying costs reduced by £0.4 million.

Staff costs

Total staff costs increased by £2.5 million to £58.6 million. Of this, £1.4 million was driven by the full-year impact of the two acquired businesses last year. Excluding acquired costs, staff costs increased by £1.1 million, from £54.5 million to £55.6 million.

Excluding the full-year impact of acquisitions, fixed staff costs decreased by £0.3 million. This was contributed by the organisational restructure the Group carried out in October 2023 where opportunities to streamline and remove duplication from core processes were identified with roles being made redundant as a result. This saving was offset by inflationary pay rises, the impact of net joiners and further investment in staff training and development.

Variable staff costs increased from £10.9 million to £12.8 million driven by the increase in pre-variable pay profit. Within this, the share-based payments charge was down £0.3 million on the prior year due to lapses recognised in FY24 as a result of leavers, and a reduction in the Group's share price impacting the associated employer national insurance contributions.

Non-staff costs

Non-staff costs amounted to £38.5 million, broadly flat on last year, a reflection of management's continued cost discipline. The Group continued to incur generic inflationary increases on the cost base, in addition to an increase in legal and professional fees to assist with the review of the Group's targeted operating model and potential M&A opportunities.

Net finance income

The Group's net finance income increased from £0.9 million to £2.9 million in FY24 as the Group attracted higher interest rates on its corporate cash balances.

Profit before tax

Combined, the above gave rise to an underlying profit before tax for the year of £34.1 million, an increase of 12.5% on the prior year (FY23: £30.3 million) and resulting in a profit margin of 26.6%, up by 2.1 points on last year's margin of 24.5%.

The Group's statutory profit before tax was £11.6 million, a reduction from last year (FY23: £22.2 million), contributed by the impairment charge recognised at 31 December 2023 in relation to the goodwill held in respect of the International business.

Segmental analysis

For FY24, the Group continued to report its results across two key operating segments, UK Investment Management and International.

The tables below provide a breakdown of the full-year performance broken down by these segments, with comparatives.

UKIM, which includes the Group's Private Clients business, increased its revenue by 4.7%, driven by higher financial planning revenue of £1.7 million as a result of the full period impact of the acquisitions, along with £2.2 million additional Investment Management fees and £1.8 million additional transactional income. These uplifts were offset by a decline in Fund Management fees. Total underlying costs increased by 8.6% as a result of the factors outlined previously, including the full-period impact of the acquisitions. This gave rise to an underlying profit for FY24 of £33.5 million (FY23: £34.5 million) and an underlying profit margin of 30.9% (FY23: 33.3%).

The International segment reported reduced revenues of £19.9 million, down 2.0% from the prior year, with reductions in Investment Management fees, Fund Management fees and Interest income, slightly offset by increases in Transactional and foreign exchange fees. The total International cost base reduced by 16.2%, as a result of the organisational restructure and cost discipline. This resulted in underlying profit increasing from £0.1 million to £3.3 million this year, and an underlying profit margin of 16.6% (FY23: 0.5%).

Table 5 - Segmental analysis

FY24 (£m)

UK Investment Management

International

Group and consolidation
adjustments

Total

Revenue

108.4

19.9

-

128.3

Direct costs

(47.9)

(11.1)

(38.1)

(97.1)

Operating contribution

60.5

8.8

(38.1)

31.2

Indirect cost recharges

(28.7)

(6.0)

34.7

-

Net finance income

1.7

0.5

0.7

2.9

Underlying profit/(loss) before tax

33.5

3.3

(2.7)

34.1

Underlying adjustments

(5.3)

(3.6)

(13.6)

(22.5)

Statutory profit/(loss) before tax

28.2

(0.3)

(16.3)

11.6






Underlying profit margin before tax

30.9%

16.6%

N/A

26.6%

Statutory profit/(loss) margin before tax

26.0%

(1.5)%

N/A

9.0%

 

FY23 (£m)

UK Investment Management

International

Group and consolidation
adjustments

Total

Revenue

103.5

20.3

-

123.8

Direct costs

(47.4)

(13.6)

(33.4)

(94.4)

Operating contribution

56.1

6.7

(33.4)

29.4

Indirect cost recharges

(22.1)

(6.8)

28.9

-

Net finance income

0.5

0.2

0.2

0.9

Underlying profit/(loss) before tax

34.5

0.1

(4.3)

30.3

Underlying adjustments

(4.8)

(3.0)

(0.3)

(8.1)

Statutory profit/(loss) before tax

29.7

(2.9)

(4.6)

22.2






Underlying profit margin before tax

33.3%

0.5%

N/A

24.5%

Statutory profit/(loss) margin before tax

28.7%

(14.3)%

N/A

17.9%

 

Reconciliation between underlying and statutory profits

Underlying profit before tax is considered by the Board to be an appropriate reflection of the Group's performance compared to the statutory results as it excludes income and expense categories, which are deemed to be of a non-recurring nature or a non-cash operating item. Reporting at an underlying basis is also considered appropriate for external analyst coverage. Underlying profit is deemed to be an alternative performance measure ("APM"); (refer to the Non-IFRS financial information section for a glossary of the Group's APMs, their definitions, and the criteria for how underlying adjustments are considered). A reconciliation between underlying and statutory profit before tax for the year ended 30 June 2024 with comparatives is shown in the table below:

Table 6 - Reconciliation between underlying profit and statutory profit before tax


FY24
£m

FY23
£m

Underlying profit before tax

34.1

30.3




Goodwill impairment

(11.6)

-

Amortisation of client relationships

(6.0)

(5.7)

Organisational restructure

(3.0)

-

International strategic review

(1.5)

-

Acquisition and integration-related costs

(0.4)

(0.6)

Dual running operating platform costs

-

(1.6)

Changes in fair value and finance cost of deferred contingent consideration

-

(0.2)

Total underlying adjustments

(22.5)

(8.1)




Statutory profit before tax

11.6

22.2

 

Goodwill impairment (£11.6 million)

Goodwill is reviewed for impairment indicators at each reporting period, and if indicators are present, an impairment test is carried out based on the carrying value of the asset compared to its expected recoverable amount. The review of our International business at 31 December 2023 indicated that the estimated recoverable amount arising from future cash flows, was less than the carrying value of the goodwill held on the Group's Consolidated statement of financial position that was recognised upon the acquisition of the business in 2012. The goodwill impairment charge has been excluded from underlying profit in view of its non-recurring nature, and the fact that it does not impact cash or regulatory capital. The annual impairment review at 30 June 2024 was also carried out and the remaining goodwill balance was fully supported. (Refer to Note 9 in the Notes to the consolidated financial statements for more details).

Amortisation of client relationship contracts (£6.0 million)

These intangible assets are created in the course of acquiring funds under management and financial advice portfolios, which are amortised over their useful life, which have been assessed to range between 6 and 20 years. This amortisation charge has been excluded from the underlying profit since it is a significant non-cash item. (Refer to Note 9 in the Notes to the consolidated financial statements for more details).

Organisational restructure (£3.0 million)

The Group carried out an organisational restructure in December 2023 to ensure it is set up for future success. The Group identified opportunities to streamline and remove duplication from core processes, resulting in redundancy and associated third-party consultancy costs. These have been excluded from underlying earnings in view of their one-off nature.

International strategic review (£1.5 million)

As announced as part of the Group's half-year results in March 2024, the Group is carrying out a strategic review of the International business as a result of its performance falling behind plan. The costs incurred relate to third-party consultancy spend to assist with the review and have been excluded from underlying earnings in view of their non-recurring nature.

Acquisition and integration-related costs (£0.4 million)

These represent the share-based payment integration charge for share options awarded to acquired employees as part of acquisitions in the prior period. In the prior year, costs were incurred in relation to the acquisitions of Integrity Wealth Solutions on 31 October 2022 and Adroit Financial Planning on 15 December 2022, in addition to the share-based payment integration charges.

FY23 - Dual running operating platform costs (£1.6 million)

The Group is in a partnership agreement with SS&C to transform our adviser and client service including the onboarding process and digital experience, as well as enhancing our operating platform. As part of the transition process in the prior year, the Group incurred net incremental costs in running two operating platforms concurrently. The dual running costs were excluded from underlying profit in view of their non-recurring nature.

FY23 - Changes in fair value and finance cost of deferred contingent consideration (£0.2 million)

This comprises the associated net finance costs arising on deferred contingent consideration payments from acquisitions carried out by the Group, together with their fair value measurements, where applicable.

Reconciliation between profits and earnings before interest, tax, depreciation and amortisation ("EBITDA")

The tables below provide reconciliations between the Group's underlying and statutory profit before tax and the underlying and statutory earnings before interest, tax, depreciation and amortisation ("EBITDA"), which constitutes an APM, and which the Board considers to be an appropriate alternative measure to the Group's BAU performance.

Table 7 - Underlying EBITDA reconciliation


FY24
£m

FY23
£m

Change
%

Underlying profit before tax

34.1

30.3

12.5%

Add back:




Net finance income

(2.9)

(0.9)

222.2%

Depreciation and amortisation

4.6

3.8

21.1%

Underlying EBITDA

35.8

33.2

7.8%

 

Table 8 - EBITDA reconciliation


FY24
£m

FY23
£m

Change
%

Statutory profit before tax

11.6

22.2

(47.7)%

Add back:




Net finance income

(2.9)

(0.8)

262.5%

Depreciation and amortisation

10.6

9.5

11.6%

Goodwill impairment

11.6

-

N/A

EBITDA

30.9

30.9

-

 

Taxation

The Group's total tax charge for the year was £5.2 million, representing an increase of 26.8% from last year (FY23: £4.1 million). The Group's underlying effective tax rate has increased from 19.7% to 22.7% and the statutory effective tax rate increased from 18.4% to 44.4%. This has been contributed to by the goodwill impairment not deductible for tax purposes, the increased CT rate in the current year and under provision from prior period tax charges. (Details on taxation are provided in Note 6 in the Notes to the consolidated financial statements).

Earnings per share

Basic statutory earnings per share for the Group in FY24 was 40.1p (FY23: 114.7p), reducing as a result of the goodwill impairment charge. On an underlying basis, basic earnings per share was 163.8p representing an increase of 6.5% on the prior year (FY23: 153.8p) driven by the increase in underlying earnings. (Details on the basic and diluted earnings per share are provided in Note 7 in the Notes to the consolidated financial statements).

Dividend

The Board recognises the importance of dividends to shareholders and the benefit of providing sustainable shareholder returns. In determining the level of dividend in any year, the Board considers a number of factors, such as the level of retained earnings, future cash commitments, statutory profit cover, capital and liquidity requirements and the level of profit retention required to sustain the growth of the Group. The Board has proposed a final dividend of 49.0p per share (FY23: 47.0p).

Including the interim dividend of 29.0p per share (FY23: 28.0p), this results in a total dividend for the year of 78.0p per share (FY23: 75.0p), which is an overall increase of 3.0p or 4.0%. (Refer to Note 8 in the Notes to the consolidated financial statements for more details).

The recommended dividend is subject to shareholders' approval, which will be sought at the Company's Annual General Meeting on 24 October 2024.

Financial position and regulatory capital

Net assets were £152.3 million at 30 June 2024 (FY23: £157.3 million), demonstrating the Group's robust financial position. The Group's tangible net assets (net assets excluding intangibles) was £69.1 million at 30 June 2024 (FY23: £56.7 million). As at 30 June 2024, the Group had regulatory capital resources of £75.7 million (FY23: £64.6 million). As at 30 June 2024, the Group had an own funds adequacy ratio of 348.5% (FY23: 328.1%). The own funds adequacy ratio is defined as the Group's own funds as a proportion of the fixed overhead requirement. The total net assets and the own funds adequacy ratio calculation take into account the respective year's profits (net of the declared interim dividends) as these are deemed to be verified at the date of publication of the annual results.

Table 9 - Own funds reconciliation


FY24
£m

FY23
£m

Share capital

0.2

0.2

Share premium

83.1

81.8

Other reserves

6.3

9.1

Retained earnings

62.7

66.2

Total equity

152.3

157.3

Intangible assets (net book value)

(83.2)

(100.6)

Deferred tax adjustment

6.6

7.9

Own funds

75.7

64.6

 

The Group includes five regulated entities that provide personalised investment management and financial consultancy services to clients within the UK and abroad. These entities comply with regulations set by the Financial Conduct Authority ("FCA"), Jersey Financial Services Commission ("JFSC"), and Guernsey Financial Services Commission ("GFSC"). The Group operates under its parent company, Brooks Macdonald Group plc ("BMG"), which is incorporated and registered in England and Wales, with the UK as its primary business market. The Group's main operating subsidiary, Brooks Macdonald Asset Management Limited ("BMAM"), is categorised as a MIFIDPRU Non-SNI Firm under the Investment Firms Prudential Regime ("IFPR") and is authorised and regulated by the FCA. As such, the Group, being the parent entity, is obliged to adhere to MIFIDPRU rules within the IFPR framework and reports to the FCA on a prudential consolidation basis.

In compliance with the regulations of the FCA, JFSC, and GFSC, the Group routinely conducts assessments of its regulatory capital and liquidity. This is achieved through the Internal Capital Adequacy and Risk Assessment ("ICARA") and Adjusted Net Liquid Asset ("ANLA") evaluations. These include a series of stress tests and scenario analyses to ascertain the requisite levels of regulatory capital and liquidity. The Group forecasts surplus capital and liquidity, factoring in anticipated outflows and proposed dividends, to ensure the perpetual adequacy of capital and liquidity.

The FY23 ICARA review was conducted for the year ended 30 June 2023 and signed off by the Board in December 2023. Regulatory capital forecasts are performed monthly and take into account expected dividends and intangible asset acquisitions and disposals where applicable, as well as budgeted and forecast trading results. The Group's IFPR Public Disclosures are published annually on the Group's website (www.brooksmacdonald.com) and provide further details about the Group's regulatory capital resources and requirements. The Group monitors a range of capital and liquidity statistics on a daily and monthly basis.

Cash flow and capital expenditure

The Group continues to have strong levels of cash generation from operations. Total cash resources at the end of the year were £44.7 million (FY23: £53.4 million) and the Group had no borrowings at 30 June 2024. The reduction in cash balance compared to the previous year was contributed by the Group investing surplus corporate cash into financial assets at amortised cost of £30.0 million, refer to Note 12 in the Notes to the consolidated financial statements for further information. Combining the financial assets at amortised cost and the cash balance totals £74.7 million at 30 June 2024, an increase of £21.3 million on the prior year.

The Group incurred capital expenditure of £1.8 million (FY23: £3.7 million). This comprised technology-related development of £1.7 million (FY23: £3.0 million), property-related and IT and office equipment of £0.1 million (FY23: £0.7 million). Half of the technology-related spend was incurred in connection with continued developments on our partnership with SS&C and amortisation started at the end of July 2022 following the migration, with the capital expenditure amortised over the remaining eight years from migration.

Reigniting growth

We have a strong business model that consistently delivers for our clients. Our current strengths include a broad investment proposition, strong distribution and brand, a robust investment process yielding attractive returns, and a talented team. Moving forward, we aim to build on these strengths to drive further growth in the attractive markets we serve. We have identified three key enablers to achieve this:

1.  Delivering excellent client service. This includes working to continually improve our technology delivery to clients, scaling our existing specialist products and creating new products to serve client demand.

2.  Broadening and deepening client reach. Improving distribution both directly to clients and to advisers by using data more heavily and effectively. We will also adapt employee incentives to reward retention of client funds as well as winning new business.

3.  Driving scale and efficiencies. Remaining focused on managing costs across the business and optimising our technology to best serve clients, freeing up time for our client-facing employees.

FY25 guidance and outlook

The structural growth opportunity in our industry remains highly attractive, underpinned by demographics, government policy and increasing use of advice. This, coupled with an improving economic outlook gives us strong confidence in delivering our strategy.

We anticipate a return to overall positive net flows later in the financial year. We expect to see the established blended revenue yield trend to follow as our Platform MPS business continues to grow at pace, which will drive operational leverage through the business.

The International transaction is due to complete by March 2025 with an impact of c. £2 million on group underlying profit in FY25.

As we guided at the half year, H2 FY24 interest income was in line with our guidance at £5 million. Following on from that, we expect interest income to be impacted by further BOE base rate reductions. For FY25, we expect client interest turn to be c. £7 million - £8 million.

We remain focused on cost discipline and efficiency to ensure we are well-positioned for future growth. Capital expenditure for FY25 is expected to be c. £4 million - £5 million.

Andrea Montague
CEO Designate and Chief Financial Officer
11 September 2024

 

 

Risk management

We have a robust approach to risk management to support positive client outcomes.

We continue to enhance our risk management processes across the Group as we look to continue to embed risk management and deliver positive risk outcomes. This work is enhancing efficiencies across the risk management framework through the greater use of data-driven evidence-based risk analysis and reporting.

We remain mindful of the current geopolitical and macroeconomic uncertainties and continue to monitor these closely both as an Executive and a Risk and Compliance Committee ("RCC").

Risk management framework

The Group's risk management framework consists of the following components:

Risk culture. We promote a risk culture that encourages ownership of and management of risk. Risk management is the responsibility of everyone.

Risk governance. The Board is ultimately responsible for the Group's risk management framework but has delegated certain responsibilities to the Risk and Compliance Committee ("RCC"), a sub-committee of the Board. The Group operates a 'three lines of defence' approach to managing risks across the Group.

Risk appetite. The objective of the Group's risk appetite framework is to ensure that the Board and senior management are properly engaged in agreeing and monitoring the Group's appetite for risk and setting acceptable boundaries for business activities and behaviours. The risk appetite categories are reviewed by the Executive Risk Management Committee ("ERMC"), RCC and approved by the Board on an annual basis. Key Risk Indicators ("KRIs") are mapped to the risk appetite categories, with KRI tolerances aligned to risk appetite. The KRIs and tolerances are subject to an annual approval process by the ERMC, RCC and Board.

Risk reporting. Risk reporting is presented to ERMC and RCC. This includes details of underlying KRIs mapped to the risk appetite categories, breaches, risk events and emerging risks.

Risk identification. The Group adopts a top-down and a bottom-up approach to the identification of risks. The ERMC and the RCC have identified the principal risks that could impact the ability of the Group to meet its strategic objectives. In addition, the Group maintains a bottom-up operational Group risk register, mapped to the Group's risk appetite categories.

Risk assessment and management. All of the risks included in the Group risk register are scored according to probability and impact and assessed on an inherent basis (before the impact of controls) and on a residual basis (after the impact of controls). Where risks are classed as outside the Group's risk appetite, actions must be taken to bring the risk back within appetite.

Risk and control self-assessment ("RCSA"). The Group's bottom-up assessment of risk is managed through the RCSA process which supports a comprehensive understanding of risks and controls in place at the operational and business process level. The RCSA process enables the risk and control owners to identify any omissions in the risk environment and to close any control gaps or weaknesses as necessary.

Policy governance framework. The policy governance framework provides minimum standards for managing the key risks that the Group faces. Each Group policy has an Executive Committee-level owner who is ultimately accountable for the design, implementation and maintenance of the policy.

Internal Capital Adequacy and Risk Assessment ("ICARA"). The Group conducts an ICARA process to ensure that it has appropriate systems and controls in place to identify, monitor and, where proportionate, reduce all potential material harms that may result from the ongoing operation of its business. The Group holds financial resources (capital and liquidity) in excess of our minimum regulatory requirements.

Principal risks

The principal risks facing the Group are detailed below, as well as any change in the year-on-year risk profile.


Key risks identified by the risk management framework

Change since last year

Rationale for change

1. Credit risk

The risk of loss arising from a client or counterparty failing to meet their financial obligations to a Brooks Macdonald entity as and when they fall due.

•    Cash deposits with external banks

•    Client credit risk

•    Counterparty credit risk

•    Custodian-related credit risk

•    Indirect counterparty risk in respect of referrals

Unchanged

The risk continues to remain unchanged given the strong credit risk control environment, including ongoing monitoring and due diligence on all counterparties.

2. Liquidity risk

The risk that assets are insufficiently liquid and/or Brooks Macdonald does not have sufficient liquidity resources available to meet liabilities as they fall due or can secure such resources only at excessive cost. Liquidity risk also includes the risk that the Group is unable to meet liquidity ratios.

•    Corporate cash deposited with external banks

•    Client cash deposited with external banks (CASS rules)

•    Failed trades

•    Indirect liquidity risk associated with client portfolios

•    Indirect liquidity risks associated with dealing

•    Indirect risk in respect of the liquidity of individual holdings in a fund

•    Indirect risk in respect of the overall liquidity of our funds

Unchanged

The Group continues to maintain liquidity resources above its minimum regulatory requirement and internal thresholds. The Group regularly monitors forecast against actual cash flows and matches the maturity profiles of financial assets and liabilities. The Group has robust contingency funding arrangements, which are tested on a periodic basis.

3. Market risk

The risk that arises from fluctuations in the value of, or income arising from, movements in equity, bonds, or other traded markets, interest rates or foreign exchange rates that have a financial impact.

•    Failed trades

•    Indirect market risk associated with advising on client portfolios

•    Indirect market risks associated with dealing

•    Indirect market risk associated with managing client portfolios

Unchanged

Market risk remains at a heightened level (unchanged, year-on-year), due to the relatively unstable political landscape; with numerous significant general elections in 2024 and ongoing conflicts in Ukraine and the Middle East, this may result in increased volatility.

4. Capital risk

The risk of adverse business and/or client impact resulting from breaching capital requirements.

•    Capital requirements

Unchanged

The Group continues to maintain capital resources above its minimum regulatory requirement and internal thresholds. The Group regularly monitors its capital resources versus capital requirements.

5. Strategic risk

The risk of having an inadequate business model or making strategic decisions that may result in lower than anticipated profit or losses or exposes the Group to unforeseen risks.

•    Acquisitions

•    Business growth

•    Extreme market events

•    Investment performance

Unchanged

Despite current macroeconomic and geopolitical challenges, the Group continues to post positive gross flows and record funds under management, highlighting the resiliency of its
business model.

6. Conduct risk

The risk of causing detriment to clients, stakeholders or the integrity of the wider market because of inappropriate execution of Brooks Macdonald's business activities.

•    Conduct/consumer harm risk

Unchanged

The Group continues to work on numerous initiatives to promote good risk and compliance culture and awareness to ensure positive client outcomes.

7. Operational risk

The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.

•    Financial control

•    Change

•    IT infrastructure

•    Operational resilience

•    Deferred delivery

•    Third parties

•    People

•    Suitability

Unchanged

The Group continues to monitor and enhance its oversight framework to mitigate any external threats brought about by the current geopolitical environment, coupled with idiosyncratic risks linked to the Group's transition to a new operating model.

8. Legislation and regulatory risk

Legislation and regulatory risk is defined as the risk of exposure to legal or regulatory penalties, financial forfeiture and material loss due to failure to act in accordance with industry laws and regulations.

•    Regulatory

•    Legal

•    Tax

Unchanged

This risk remains unchanged given that the regulatory landscape and focus on the wealth management industry has not changed.

9. Financial crime risk

The risk of failure to protect the Group and its customers from all aspects of financial crime, including anti-money laundering ("AML") and market abuse.

•    Fraud

•    AML

•    Market abuse

Unchanged

This risk remains unchanged, the Group maintains robust controls in place to minimise financial crime.

10. Cyber risk

The risk of a malicious attack by individuals or organisations attempting to gain access to the Company's network to corrupt data, disrupt, and steal confidential information.

•    Cyber

Unchanged

The cyber threat landscape remains at a heightened level (unchanged, year-on-year), with a high volume of sophisticated cyber threat activity.

11. Environmental, Social & Governance ("ESG") risk

The risk that environmental, social and governance factors could negatively impact the Group, its clients and the wider community.

•    Environmental, physical and transition

•    Diversity, equity and inclusion

•    Governance

Unchanged

This risk remains unchanged. The Group has established an Environmental, Social and Governance Advisory Committee ("ESGAC") to manage all ESG-related matters.

The Group is committed to creating an inclusive workplace and prioritising employee wellbeing.

The Group has a robust governance framework.

 

Emerging Risks

Definition

Context

12. Geopolitical landscape

The relatively unstable political landscape, with numerous significant general elections in 2024 and ongoing conflicts in Ukraine and the Middle East.

Geopolitical events have a direct impact on market risk listed previously. Prolonged economic downturn also has an impact on client sentiment and thus strategic risk as listed previously. The large majority for Labour in the UK general election is viewed as being good for market sentiment and stability.

13. Generational wealth change

The potential decrease in FUM as financial assets are distributed from one generation to the next.

With generational wealth poised to change hands, primarily from the baby boomers to Gen X and millennials through the next decade, younger investors may have different priorities and views on how their inheritance is managed.

14. Disruptive technologies

The risk that innovative technologies significantly alter the way businesses operate.

With the introduction of new technologies such as AI, the industry is being impacted particularly in automated trading, investment advice, fraud detection, customer service, and portfolio management.

 

 

Viability statement

In accordance with the UK Corporate Governance Code, the Board has assessed the Group's viability over a five-year period. The decision to do so is to be aligned with the Group's strategy, its budgeting and forecasting process and the scenarios set out in the 2023 Internal Capital Adequacy and Risk Assessment ("ICARA").

The Board has carried out a robust assessment of the principal risks facing the Group along with the stress tests and scenarios that would threaten the sustainability of its business model, future performance, solvency or liquidity. This assessment is based on the Group's Medium-Term Plan ("MTP"), the ICARA and an evaluation of the Group's emerging and principal risks, as set out in the Risk management section.

In assessing the future viability of the overall business, the Board has considered the current and future strategy. The Board has also considered the business environment of the Group and the potential threats to its business model arising from regulatory, demographic, political and technological changes. Moreover, the Board's assessment considered the current macroeconomic environment, the impact of volatile markets, inflation, and interest rates on the Group's profitability, regulatory capital and liquidity forecasts. The Board's assessment of the Group's capital and liquidity position also considers the implications of meeting the Group's proposed interim and final dividend pay-outs.

The five-year MTP forms part of the Group's annual business planning process. The model translates the Group's current and future strategy into a detailed year-one budget, followed by higher-level forecasts for years two through to five. The combination of this detailed budgeting, longer-term forecasting and various stress tests provides a transparent and holistic view of the forward-looking financial prospects of the Group. The Board reviews and challenges the Group's MTP annually. The MTP covering the five-year period from FY24 to FY28, which underpins the 2023 ICARA, was challenged and approved by the Board in December 2023. The MTP for the five-year period covering FY25 to FY29 was reviewed and challenged by the Board in August 2024.

In addition to the annual MTP preparation process, a re-forecast is carried out by management and reviewed by the Board on a quarterly basis. These reflect updates for prevailing trading conditions and other changes required to the budget assumptions set at the start of the year.

As part of the ICARA, the Group models a range of downside scenarios and a severe but plausible stress scenario designed to assess the Group's ability to withstand a market-wide shock, such as a sharp market decline triggered by a global recession, Group-specific stresses, such as the loss of an investment management team or key introducer, and a combination of both.

The Group modelled a multi-layered scenario involving a significant decline in financial markets over a five-year period (with UK equities modelled to lose 45% of their value with correlated impacts modelled across the Group's portfolios, with a gradual recovery), combined with the loss of a key investment management team. This scenario would have a material impact on the Group's profitability compared to the MTP base case, giving a significant reduction to regulatory capital surpluses, before putting in place any mitigating management actions.

Management identified a number of mitigating actions that could be implemented in the event of such severe stresses. In this scenario, the mitigation actions implemented were to reduce discretionary compensation and to impose departmental cost reductions to ensure a greater capital surplus was maintained against the minimum capital requirement. Although the Group does not fall into a regulatory capital deficit during the stress period, management actions were implemented to strengthen regulatory resources and bolster profitability. If deemed appropriate, mitigating actions could include reduction of external dividend payments and an increased focus on cost reduction across the business. The implementation of the above actions depends on the nature of the specific stress events and the time frames over which they occur.

These scenarios are subject to regular review to ensure they remain relevant and continue to be a suitable tool for developing our controls and mitigating actions. Management also considers a reverse stress case and carries out an assessment of the cost to the Group of a wind-down in the event of a non-recoverable shock to the operating model. Moreover, management has identified a number of actions that could be implemented in the event of severe stresses.

Taking into consideration the assessment of the above factors, including the results of the latest ICARA, the Group's risk management framework and the mitigating actions that can be put in place, the Board has reasonable expectations the Group will be able to continue in operation and meet its liabilities as they fall due over the period under assessment. This assessment also supports the Group's Consolidated financial statements to be prepared on a going concern basis, as discussed in Note 2 in the Notes to the consolidated financial statements.

 

 

Consolidated statement of comprehensive income

For the year ended 30 June 2024


Note

2024
£'000

 2023
£'000

Revenue

4

128,262

123,777

Administrative costs


(107,934)

(102,207)

Gross profit


20,328

21,570

Other gains/(losses) - net


83

(162)

Operating profit


20,411

21,408

Finance income

5

3,056

1,127

Finance costs

5

(208)

(296)

Goodwill impairment

9

(11,641)

-

Profit before tax


11,618

22,239

Taxation

6

(5,161)

(4,090)

Profit for the year


6,457

18,149

Other comprehensive income


-

-

Total comprehensive income for the year


6,457

18,149





Earnings per share




Basic

7

40.1p

114.7p

Diluted

7

39.4p

112.6p

 

 

Consolidated statement of financial position

As at 30 June 2024


Note

30 June 2024
£'000

30 June 2023
£'000

Assets




Non-current assets




Intangible assets

9

83,224

100,582

Property, plant and equipment

10

1,350

2,123

Right-of-use assets

11

3,225

4,329

Financial assets at amortised cost

12

29,963

-

Financial assets at fair value through other comprehensive income


500

500

Total non-current assets


118,262

107,534





Current assets




Financial assets at fair value through profit or loss


905

825

Trade and other receivables


29,061

33,542

Cash and cash equivalents


44,732

53,355

Total current assets


74,698

87,722

Total assets


192,960

195,256





Liabilities




Non-current liabilities




Lease liabilities

14

(1,645)

(3,181)

Provisions

15

(378)

(322)

Net deferred tax liabilities

13

(5,394)

(6,033)

Other non-current liabilities


(587)

(783)

Total non-current liabilities


(8,004)

(10,319)





Current liabilities




Lease liabilities

14

(2,169)

(1,960)

Provisions

15

(1,628)

(1,000)

Deferred contingent consideration


-

(1,467)

Trade and other payables


(27,889)

(22,521)

Current tax liabilities


(935)

(645)

Total current liabilities


(32,621)

(27,593)

Net assets


152,335

157,344





Equity




Share capital

17

165

164

Share premium account

17

83,135

81,830

Other reserves


6,363

9,112

Retained earnings


62,672

66,238

Total equity


152,335

157,344

 

The Consolidated financial statements were approved by the Board of Directors and authorised for issue on 11 September 2024, and signed on their behalf by:

Andrew Shepherd                                                    Andrea Montague

CEO                                                                            CEO Designate and Chief Financial Officer

Company registration number: 4402058

 

 

Consolidated statement of changes in equity

For the year ended 30 June 2024


Note

Share capital
£'000

Share
premium
account
£'000

Other
reserves
£'000

Retained earnings
£'000

Total
equity
£'000

Balance at 1 July 2022


162

79,141

9,962

59,160

148,425








Comprehensive income







Profit for the year


-

-

-

18,149

18,149

Other comprehensive income


-

-

-

-

-

Total comprehensive income


-

-

-

18,149

18,149








Transactions with owners







Issue of ordinary shares

17

2

2,689

-

-

2,691

Share-based payments


-

-

2,686

-

2,686

Share options exercised


-

-

(3,201)

3,201

-

Purchase of own shares by Employee Benefit Trust


-

-

-

(2,850)

(2,850)

Tax on share options


-

-

(335)

-

(335)

Dividends paid

8

-

-

-

(11,422)

(11,422)

Total transactions with owners


2

2,689

(850)

(11,071)

(9,230)








Balance at 30 June 2023


164

81,830

9,112

66,238

157,344








Comprehensive income







Profit for the year


-

-

-

6,457

6,457

Other comprehensive income


-

-

-

-

-

Total comprehensive income


-

-

-

6,457

6,457








Transactions with owners







Issue of ordinary shares

17

1

1,305

-

-

1,306

Share-based payments


-

-

2,407

-

2,407

Share options exercised


-

-

(4,221)

4,221

-

Purchase of own shares by Employee Benefit Trust


-

-

-

(2,150)

(2,150)

Tax on share options


-

-

(935)

-

(935)

Dividends paid

8

-

-

-

(12,094)

(12,094)

Total transactions with owners


1

1,305

(2,749)

(10,023)

(11,466)








Balance at 30 June 2024


165

83,135

6,363

62,672

152,335

 

 

Consolidated statement of cash flows

For the year ended 30 June 2024


Note

2024
£'000

2023
£'000

Cash flows from operating activities




Cash generated from operations

16

43,336

30,093

Corporation tax paid


(6,444)

(5,134)

Net cash generated from operating activities


36,892

24,959





Cash flows from investing activities




Purchase of computer software

9

(1,734)

(2,954)

Purchase of property, plant and equipment

10

(83)

(745)

Investment in financial assets at amortised cost

12

(29,978)

-

Purchase of financial assets at fair value through profit or loss


-

(30)

Consideration paid for acquisitions


-

(15,111)

Deferred contingent consideration paid


(852)

(334)

Interest received

5

3,231

1,127

Net cash used in investing activities


(29,416)

(18,047)





Cash flows from financing activities




Proceeds of issue of shares

17

681

1,691

Payment of lease liabilities

14

(2,536)

(2,304)

Purchase of own shares by Employee Benefit Trust

17

(2,150)

(2,850)

Dividends paid to shareholders

8

(12,094)

(11,422)

Net cash used in financing activities


(16,099)

(14,885)





Net decrease in cash and cash equivalents


(8,623)

(7,973)





Cash and cash equivalents at beginning of year


53,355

61,328

Cash and cash equivalents at end of year


44,732

53,355

 

 

Notes to the consolidated financial statements

For the year ended 30 June 2024

1. General information

Brooks Macdonald Group plc (the "Company") is the Parent Company of a group of companies (the "Group"), which offer a range of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts. The Group also provides financial planning as well as international investment management, and acts as fund manager to a range of onshore and international funds.

The Company is a public limited company by shares, incorporated and domiciled in England, United Kingdom under the Companies Act 2006 and listed on AIM. The address of its registered office is 21 Lombard Street, London, EC3V 9AH, England.

 

2. Principal accounting policies

The general accounting policies applied in the preparation of these Financial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated.

a. Basis of preparation

The Group's Consolidated financial statements for the year ended 30 June 2024 have been prepared in accordance with UK-adopted International Accounting Standards ("IAS") and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. These Consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments or deferred contingent consideration that are measured at fair value. Historic cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below. Unless otherwise stated, they have been applied consistently to all periods presented in the Financial statements.

At the time of approving the Financial statements, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial statements. For further details on the Group's going concern assessment, refer to the Viability statement. There have been no post balance sheet events that have materially impacted the Group's liquidity headroom and going concern assessment.

b. Changes in accounting policies

The Group's accounting policies, which have been applied in preparing these Financial statements, are consistent with those disclosed in the Annual Report and Financial Statements for the year ended 30 June 2023, except as explained below.

New accounting standards, amendments and interpretations adopted in the year

In the year ended 30 June 2024, the Group did not adopt any new standards or amendments issued by the International Accounting Standards Board ("IASB") or interpretations by the International Financial Reporting Standards Interpretations Committee ("IFRS IC") that have had a material impact on the Consolidated financial statements.

Certain new accounting standards, amendments to accounting standards, and interpretations have been published that are not mandatory for 30 June 2024 reporting periods and have not been early adopted by the Group. These standards, amendments or interpretations are not expected to have a material impact on the Group in the current or future reporting periods or on foreseeable future transactions.



 

 

Standard, Amendment or Interpretation

Effective date

IFRS 17 'Insurance contracts'

1 January 2023

Deferred tax related to assets and liabilities arising from a single transaction (amendment to IAS 12)

1 January 2023

Definition of Accounting Estimates (amendments to IAS 8)

1 January 2023

Disclosure of Accounting Policies (amendments to IAS 1 and IFRS Practice Statement 2)

1 January 2023

Classification of Liabilities as Current or Non-Current (amendments to IAS 1)

1 January 2023

Initial application of IFRS 17 and IFRS 9 - Comparative information (amendments to IFRS 17)

1 January 2022

 

c. Critical accounting estimates and material accounting policy information

The preparation of financial information requires the use of assumptions, estimates and judgements about future conditions. Use of currently available information and application of judgement are inherent in the formation of estimates. Actual results in the future may differ from those reported. In this regard, the Directors believe that the accounting policies, where important estimations are used, relate to the measurement of intangible assets and the estimation of the fair value of share-based payments. Management also needs to exercise judgement in applying the Group's accounting policies.

The preparation of the Group's Consolidated financial statements includes the use of estimates, assumptions and significant judgements. The significant accounting estimates, being those with a significant risk of a material change to the carrying value of assets and liabilities within the next year in terms of IAS 1, 'Presentation of Financial Statements', are the useful economic life estimates for acquired client-relationship contracts.

The Consolidated financial statements include other areas of judgement and accounting estimates. Whilst these areas do not meet the definition under IAS 1 of significant accounting estimates or critical accounting judgements, the recognition and measurement of certain material assets and liabilities are based on assumptions and/or are subject to longer-term uncertainties. The other areas of judgement and accounting estimates are the pre-tax discount rate and perpetuity growth rate used within the International, Braemar, Cornelian, Adroit and Integrity CGU goodwill impairment reviews. See Note 9 for further details on the discount rate and the perpetuity growth for the various CGUs. Additionally, the inputs into the Black-Scholes model used to value the Group's equity-settled share-based payments (Note 18).

The underlying assumptions and estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised only if the revision affects both current and future periods.

Further information about key assumptions and sources of estimation uncertainty are set out below.

Intangible assets

The Group has acquired client relationships and the associated investment management and financial advice contracts as part of business combinations, through separate purchase or with newly employed teams of fund managers, as described in Note 9. In assessing the fair value of these assets, the Group has estimated their finite life based on information about the typical length of existing client relationships. Acquired client relationship contracts are amortised on a straight-line basis over their estimated useful lives, ranging from 6 to 20 years.

Of the client relationship intangible assets held by the Group at 30 June 2024, the expected amortisation charge for the year ending 30 June 2025 is £5,326,000. If the useful economic lives were to reduce by one year, the estimated charge would increase by £3,547,000.

Goodwill recognised as part of a business combination is not amortised but instead reviewed annually for impairment, or when a change in circumstances indicates that it might be impaired. The recoverable amounts of CGUs are determined by value-in-use calculations, which require the use of estimates to derive the projected future cash flows attributable to each unit. Details of the more significant assumptions and sensitivity analysis are given in Note 9.

In assessing the value of client relationships and the associated investment management and financial advice contracts and goodwill or gain on bargain purchase arising as part of a business combination, the Group prepares forecasts for the cash flows acquired and discounts to a net present value. The Group uses a pre-tax discount rate, adjusting from a post-tax discount rate calculated by the Group's weighted average cost of capital ("WACC"), adjusted for any specific risks for the relevant CGU. The Group uses the capital asset pricing model ("CAPM") to estimate the WACC, which is calculated at the point of acquisition for a business combination, or the relevant reporting period date. The key inputs are the risk-free rate, market risk premium, the Group's adjusted beta with reference to beta data from peer-listed companies, small company premium and any risk-adjusted premium for the relevant CGU. See Note 9 for further details on the discount rate for the various CGUs.

Share-based payments

The Group operates various share-based payment schemes in respect of services received from certain employees. Estimating the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the inputs to that model (Note 18). The charge to the Consolidated statement of comprehensive income in respect of share-based payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number of employees that will satisfy the relevant performance conditions. These estimates are reviewed regularly. A decrease of 10% in the total options would decrease the estimated share-based payment charge and the associated national insurance charge in the Consolidated statement of comprehensive income for the year by £381,000 and £87,000, respectively, hence these assumptions do not constitute a critical estimate. The key inputs into the fair value calculations for the options granted during the year are disclosed in Note 18.

Income tax

The Directors have to estimate at each year end a provision for income taxes that takes into account the utilisation of existing deferred tax assets when available and, therefore, the level of the future taxable profits of the Company that support the recoverability of these deferred tax assets. The key inputs are management approved forecasts, determining if there will be sufficient future taxable profits to recognised deferred tax assets.

Non-current assets held for sale

IFRS 5 'Non-current assets held for sale and discontinued operations' outlines how to account for non-current assets held for sale. Management judgement is required in determining whether the IFRS 5 held for sale criteria are met, including whether a sale is highly probable and expected to complete within one year of classification. Judgement typically involves evaluating the likelihood of obtaining any necessary approvals, determining the stage of negotiations and commitment of any potential interested parties, the likelihood of selling at a reasonable price and any possibility of a sale plan to change. Once classified as held-for-sale, continuous judgement is required to ensure the classification remains appropriate in future accounting periods.

As part of the ongoing strategic review of the International business, the Group evaluated potential outcomes, including the possible disposal of the International business. Management applied judgement in assessing that the International business did not meet the IFRS 5 criteria for classification as held for sale at 30 June 2024 on the basis that a potential sale was still at the early stages. Consequently, the International business has not been classified as held for sale within these Consolidated financial statements.

 

3. Segmental information

For management purposes, the Group's activities are organised into two operating divisions: UK Investment Management and International. The Group's other activity, offering nominee and custody services to clients, is included within UK Investment Management. These divisions are the basis on which the Group reports its primary segmental information to the Group Board of Directors, which is the Group's chief operating decision-maker. In accordance with IFRS 8 'Operating Segments', disclosures are required to reflect the information that the Board of Directors uses internally for evaluating the performance of its operating segments and allocating resources to those segments. The information presented in this Note is consistent with the presentation for internal reporting.

The UK Investment Management segment offers a range of investment management services to private high net worth individuals, pension funds, institutions, charities and trusts, as well as wealth management services to high net worth individuals and families, giving independent 'whole of market' financial advice, enabling clients to build, manage and protect their wealth. The International segment is based in the Channel Islands and the Isle of Man, offering a similar range of investment management and wealth management services as the UK Investment Management segment. The Group segment principally comprises the Group Board's management and associated costs, along with the consolidation adjustments.

Revenues and expenses are allocated to the business segment that originated the transaction. Sales between segments are carried out at arm's length. Centrally incurred expenses are allocated to business segments on an appropriate pro rata basis.

Year ended 30 June 2024

UK Investment Management
£'000

International
£'000

Group and consolidation adjustments
£'000

Total
£'000

Total revenue

113,713

19,911

-

133,624

Inter-segment revenue

(5,362)

-

-

(5,362)

External revenue

108,351

19,911

-

128,262

Underlying administrative costs

(47,863)

(11,126)

(38,122)

(97,111)

Operating contribution

60,488

8,785

(38,122)

31,151

Allocated costs

(28,743)

(5,951)

34,694

-

Net finance income and other gains/losses

1,774

477

690

2,941

Underlying profit/(loss) before tax

33,519

3,311

(2,738)

34,092






Goodwill impairment

-

-

(11,641)

(11,641)

Amortisation of acquired client relationship contracts

(3,383)

(2,465)

-

(5,848)

Organisational restructure

(1,729)

(887)

(423)

(3,039)

International strategic review costs

-

-

(1,513)

(1,513)

Acquisition and integration related costs

(423)

-

-

(423)

Finance cost of deferred contingent consideration

-

-

(13)

(13)

Change in fair value of deferred contingent consideration

-

-

3

3

Profit/(loss) mark-up on Group allocated costs

258

(258)

-

-

Total underlying adjustments

(5,277)

(3,610)

(13,587)

(22,474)






Profit/(loss) before tax

28,242

(299)

(16,325)

11,618

Taxation




(5,161)

Profit for the year attributable to equity holders of the Company




6,457

 

Year ended 30 June 2024

UK Investment Management
£'000

International
£'000

Group and consolidation adjustments
£'000

Total
£'000

Total assets

92,377

26,706

73,877

192,960

Total liabilities

(33,775)

(2,775)

(4,075)

(40,625)

Net assets

58,602

23,931

69,802

152,335

 

Year ended 30 June 2024

UK Investment Management
£'000

International
£'000

Group and consolidation adjustments
£'000

Total
£'000

Statutory operating costs included the following:





-   Amortisation

4,296

941

2,214

7,451

-   Depreciation

2,175

809

11

2,995

-   Interest income

1,709

516

606

2,831

 

Year ended 30 June 2023

UK Investment Management
£'000

International
£'000

Group and consolidation adjustments
£'000

Total
£'000

Total revenue

109,737

20,319

-

130,056

Inter-segment revenue

(6,279)

-

-

(6,279)

External revenue

103,458

20,319

-

123,777

Underlying administrative costs

(47,405)

(13,576)

(33,373)

(94,354)

Operating contribution

56,053

6,743

(33,373)

29,423

Allocated costs

(22,127)

(6,844)

28,971

-

Net finance costs

590

226

88

904

Underlying profit/(loss) before tax

34,516

125

(4,314)

30,327






Amortisation of client relationships

(3,205)

(2,465)

-

(5,670)

Dual running costs of operating platforms

(1,424)

(192)

-

(1,616)

Acquisition and integration-related costs

(499)

-

(69)

(568)

Changes in fair value of deferred contingent consideration

-

-

(173)

(173)

Finance cost of deferred contingent consideration

-

(7)

(54)

(61)

Profit/(loss) mark-up on Group allocated costs

299

(299)

-

-

Total underlying adjustments

(4,829)

(2,963)

(296)

(8,088)






Profit/(loss) before tax

29,687

(2,838)

(4,610)

22,239

Taxation




(4,090)

Profit for the year attributable to equity holders of the Company




18,149

 

Year ended 30 June 2023

UK Investment Management
£'000

International
£'000

Group and consolidation adjustments
£'000

Total
£'000

Total assets

91,141

26,537

77,578

195,256

Total liabilities

(30,175)

(2,541)

(5,196)

(37,912)

Net assets

60,966

23,996

72,382

157,344

 

Year ended 30 June 2023

UK Investment Management
£'000

International
£'000

Group and consolidation adjustments
£'000

Total
£'000

Statutory operating costs included the following:





-   Amortisation

3,429

912

2,491

6,832

-   Depreciation

1,943

689

17

2,649

-   Interest income

762

279

51

1,092

 

4. Revenue

Year ended 30 June 2024

UK Investment Management
£'000

International
£'000

Total
£'000

Investment management fees

67,825

12,027

79,852

Transactional income and foreign exchange trading fees

12,394

2,946

15,340

Fund management fees

8,583

3,565

12,148

Financial planning income

8,182

-

8,182

Interest income

11,367

1,373

12,740

Total revenue

108,351

19,911

128,262

 

Year ended 30 June 2023

UK Investment Management
£'000

International
£'000

Total
£'000

Investment management fees

65,626

12,292

77,918

Transactional income and foreign exchange trading fees

10,578

2,704

13,282

Fund management fees

9,983

3,739

13,722

Financial planning income

6,446

-

6,446

Interest income

10,825

1,584

12,409

Total revenue

103,458

20,319

123,777

 

a. Geographic analysis

The Group's operations are located in the United Kingdom and the Channel Islands. The following table presents external revenue analysed by the geographical location of the Group subsidiary entity providing the service.


2024
£'000

20231
£'000

United Kingdom

108,351

103,458

Channel Islands

19,911

20,319

Total revenue

128,262

123,777

1 The prior year geographical revenue analysis has been reclassified with £146,000 previously reported within the Isle of Man now recognised within the Channel Islands.

b. Major clients

The Group is not reliant on any one client or group of connected clients for the generation of revenues.

 

5. Finance income and finance costs


2024
£'000

2023
£'000

Finance income



Dividends on preference shares

28

35

Interest on assets held at amortised cost

197

-

Bank interest on deposits

2,831

1,092

Total finance income

3,056

1,127




Finance costs



Finance cost of lease liabilities (Note 14)

195

235

Finance cost of deferred contingent consideration

13

61

Total finance costs

208

296

 

6. Taxation

The tax charge on profit for the year was as follows:


2024
£'000

2023
£'000

UK Corporation Tax at 25% (FY23: 20.5%)

6,221

5,703

Over provision in prior years

514

(834)

Total current tax

6,735

4,869

Deferred tax credits

(1,788)

(1,189)

Under provision of deferred tax in prior years

214

410

Income tax expense

5,161

4,090

 

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the time apportioned tax rate applicable to profits of the consolidated entities in the UK as follows, split out between underlying and statutory profits:

Year ended 30 June 2024

Underlying profit
£'000

Underlying profit adjustments
£'000

Statutory profit
£'000

Profit/(loss) before taxation

34,092

(22,474)

11,618


 

 

 

Profit/(loss) multiplied by the standard rate of tax in the UK of 25%

8,523

(5,619)

2,904

Tax effect of amounts that are not deductible/(taxable) in calculating taxable income:

 

 

 

Depreciation and amortisation

543

34

577

Non-taxable income

(6)

-

(6)

Overseas tax losses not available for UK tax purposes

(366)

-

(366)

Lower tax rates in other jurisdictions in which the Group operates

(121)

-

(121)

Disallowable expenses

316

3

319

Share-based payments

(1,676)

106

(1,570)

Over provision in prior years

514

-

514

Goodwill impairment

-

2,910

2,910

Income tax expense/(credit)

7,727

(2,566)

5,161





Effective tax rate

22.7%

n/a

44.4%

 

The higher effective tax rate on underlying and statutory profit has been contributed by the goodwill impairment not deductible for tax purposes, the increased Corporation Tax rate in the current year and under provision from prior period tax charges.

Year ended 30 June 2023

Underlying profit
£'000

Underlying profit adjustments
£'000

Statutory profit
£'000

Profit/(loss) before taxation

30,327

(8,088)

22,239





Profit/(loss) multiplied by the standard rate of tax in the UK of 20.5%

6,217

(1,658)

4,559

Tax effect of amounts that are not deductible/(taxable) in calculating taxable income:




Depreciation and amortisation

604

(285)

319

Non-taxable income

(124)

-

(124)

Overseas tax losses not available for UK tax purposes

67

-

67

Lower tax rates in other jurisdictions in which the Group operates

(107)

-

(107)

Disallowable expenses

263

48

311

Share-based payments

(512)

-

(512)

Over provision in prior years

(423)

-

(423)

Income tax expense/(credit)

5,985

(1,895)

4,090





Effective tax rate

19.7%

n/a

18.4%

 

The standard rate of Corporation Tax in the UK was 25.0% with effect from 1 April 2023. Accordingly, the Company's profits for this accounting year are taxed at a rate of 25.0% (FY23: 20.5%). The relevant deferred tax balances have been remeasured at this increased rate from the prior year. Deferred tax assets and liabilities are calculated at the rate that is expected to be in force when the temporary differences unwind, however, limited to the extent that such rates have been substantively enacted.

The deferred tax charges for the year arise from:


2024
£'000

2023
£'000

Share-based payments

(503)

(1)

Accelerated capital allowances

71

(27)

Accelerated capital allowances on research and development

(152)

(117)

Dilapidations

7

(54)

Amortisation of acquired client relationship contracts

(1,427)

(934)

Trading losses carried forward

216

(56)

Under provision in prior years

214

410

Deferred tax charge

(1,574)

(779)

 

7. Earnings per share

The Directors believe that underlying earnings per share provides an appropriate reflection of the Group's performance in the year. Underlying earnings per share, which is an alternative performance measure ("APM"), is calculated based on 'underlying earnings', which is also an APM. Refer to the Non-IFRS Information section for a glossary of the Group's APMs, their definition and criteria for how underlying adjustments are considered. The tax effect of the underlying adjustments to statutory earnings has also been considered; refer to Note 6 for the taxation on underlying and statutory profit. Earnings for the year used to calculate earnings per share as reported in these Consolidated financial statements were as follows:


2024
£'000

2023
£'000

Earnings attributable to ordinary shareholders

6,457

18,149

Amortisation of acquired client relationship contracts (Note 9)

5,848

5,670

Dual running costs of operating platform

-

1,616

Acquisition and integration-related costs

423

568

Changes in fair value of deferred contingent consideration

(3)

173

International strategic review

1,513

-

Impairment of goodwill

11,641

-

Restructure costs

3,039

-

Finance cost of deferred contingent consideration

13

61

Tax impact of adjustments (Note 6)

(2,566)

(1,895)

Underlying earnings attributable to ordinary shareholders

26,365

24,342

 

Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of shares in issue throughout the period. Included in the weighted average number of shares for basic earnings per share purposes are employee share options at the point all necessary conditions have been satisfied and the options have vested, even if they have not yet been exercised.

Diluted earnings per share represents the basic earnings per share adjusted for the effect of dilutive potential shares issuable on exercise of employee share options under the Group's share-based payment schemes, weighted for the relevant period.

The diluted weighted average number of shares in issue and diluted earnings per share considers the effect of all dilutive potential shares issuable on exercise of employee share options. The potential shares issuable includes the contingently issuable shares that have not yet vested and the vested unissued share options that are either nil cost options or have little or no consideration.

The weighted average number of shares in issue during the year was as follows:


2024
Number of shares

2023
Number
of shares

Weighted average number of shares in issue

16,098,412

15,825,397

Effect of dilutive potential shares issuable on exercise of employee share options

275,450

293,992

Diluted weighted average number of shares in issue

16,373,862

16,119,389

 

Earnings per share for the year attributable to equity holders of the Company were:


2024
p

2023
p

Based on reported earnings:



Basic earnings per share

40.1

114.7

Diluted earnings per share

39.4

112.6




Based on underlying earnings:



Basic earnings per share

163.8

153.8

Diluted earnings per share

161.0

151.0

 

8. Dividends

Amounts recognised as distributions to equity holders of the Company in the year were as follows:


2024
£'000

2023
£'000

Final dividend paid for the year ended 30 June 2023 of 47.0p (FY22: 45.0p) per share

7,467

7,021

Interim dividend paid for the year ended 30 June 2024 of 29.0p (FY23: 28.0p) per share

4,627

4,401

Total dividends

12,094

11,422




Final dividend proposed for the year ended 30 June 2024 of 49.0p (FY23: 47.0p) per share

7,865

7,448

 

The interim dividend of 29.0p (FY23: 28.0p) per share was paid on 16 April 2024.

A final dividend for the year ended 30 June 2024 of 49.0p (FY23: 47.0p) per share was declared by the Board of Directors on 12 September 2024 and is subject to approval by the shareholders at the Company's Annual General Meeting. It will be paid on 1 November 2024 to shareholders who are on the register at the close of business on 20 September 2024. In accordance with IAS 10 'Events After the Reporting Period', the aggregate amount of the proposed dividend expected to be paid out of retained earnings is not recognised as a liability in these Consolidated financial statements.

 

9. Intangible assets


Goodwill
£'000

Computer software
£'000

Acquired client relationship contracts
£'000

Contracts acquired with fund managers
£'000

Total
£'000

Cost






At 1 July 2022

51,887

6,930

70,011

3,521

132,349

Additions

12,486

2,954

6,087

-

21,527

Disposals

-

(1,054)

-

(3,521)

(4,575)

At 30 June 2023

64,373

8,830

76,098

-

149,301

Additions

-

1,734

-

-

1,734

At 30 June 2024

64,373

10,564

76,098

-

151,035







Accumulated amortisation and impairment






At 1 July 2022

11,213

251

31,477

3,521

46,462

Amortisation charge

-

1,162

5,670

-

6,832

Accumulated amortisation on disposals

-

(1,054)

-

(3,521)

(4,575)

At 30 June 2023

11,213

359

37,147

-

48,719

Amortisation charge

-

1,603

5,848

-

7,451

Impairment

11,641

-

-

-

11,641

At 30 June 2024

22,854

1,962

42,995

-

67,811







Net book value






At 1 July 2022

40,674

6,679

38,534

-

85,887

At 30 June 2023

53,160

8,471

38,951

-

100,582

At 30 June 2024

41,519

8,602

33,103

-

83,224

 

The amortisation charge of intangible assets is recognised within administrative costs in the Consolidated statement of comprehensive income.

At 30 June 2024, intangible assets net book value totalling £70,009,000 are recognised in the United Kingdom and £13,215,000 are recognised in the Channel Islands.

a. Goodwill

Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefit from that business combination. The carrying amount of goodwill in respect of these CGUs within the operating segments of the Group comprises:


2024
£'000

2023
£'000

Funds



Braemar Group Limited ("Braemar")

3,320

3,320




International



Brooks Macdonald Asset Management (International) Limited ("Brooks Macdonald International")

9,602

21,243




Cornelian



Cornelian Asset Managers Group Limited ("Cornelian")

16,111

16,111




Integrity



Integrity Wealth (Holdings) Limited ("Integrity")

3,945

3,945




Adroit



Adroit Financial Planning Limited ("Adroit")

8,541

8,541




Total goodwill

41,519

53,160

 

Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2024 by comparing the carrying amount of the CGUs to their expected recoverable amount, estimated on a value-in-use basis. The value in use of each CGU has been calculated using pre-tax discounted cash flow projections based on the most recent budgets and forecasts approved by the relevant subsidiary company boards of directors. The most recent budgets prepared are part of the detailed budget process for the year ending 30 June 2024, and then extrapolated over a longer period for the following four years, resulting in the budgets and forecasts covering a period of five years. Cash flows are then extrapolated beyond the five-year budget and forecast period using an expected long-term growth rate, with the long-term growth rate considered reasonable against the budgeted and forecast growth.

During the six months ended 31 December 2023, the prevailing macroeconomic environment and market volatility seen during the reporting period had an impact on client sentiment and new business, whilst the higher interest rate environment resulted in higher outflows with clients withdrawing funds to repay debt. This gave rise to impairment indicators in relation to the International CGU, which were recognised upon the acquisition of the Spearpoint business in 2012. Accordingly, an impairment review was carried out for this CGU, and based on a value-in-use calculation, the recoverable amount of the International CGU at 31 December 2023 did not support the carrying amount of the International CGU of £31,311,000. As a result, the International goodwill balance was impaired by £11,641,000, leaving a goodwill balance of £9,061,000 as at 31 December 2023.

International

Based on a value-in-use calculation as at 30 June 2024, the recoverable amount of the Brooks Macdonald International CGU at 30 June 2024 was £36,697,000 (FY23: £33,642,000), giving a surplus over the Brooks Macdonald International CGU carrying amount of £17,263,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 13% (FY23: 13%) has been used, based on the Group's assessment of the risk-free rate of interest and specific risks relating to Brooks Macdonald International. The key input in forecasting revenue is FUM, which is forecast to grow based on new business targets, attrition and estimated impact of market performance. FUM is multiplied by estimated fee yields for the business resulting in annual revenue growth between 4% and 6% annually over the five-year period. Expenditure growth is forecast to increase by between 3% and 4% annually over the five-year period, which includes consideration for reasonable allocated costs. The underlying methodology for allocating costs is reviewed by management each year when preparing the value-in-use calculations to ensure the methodology remains appropriate. The period covered is five years and the forecasts are based on management's growth projections for the business based on its strategic objectives, taking into account historic performance and prevailing market and economic conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds and investment management industries in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment, including the outcome of the strategic review discussed in Note 21; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

•    An increase of the pre-tax discount rate of 10% (FY23: 2%), from 13% to 23%, would result in an impairment.

•    The perpetuity growth rate would need to reduce by 29% (FY23: 2%), from 2% to (27%), to result in an impairment.

•    The forecast pre-tax cash inflows would need to reduce by 44% (FY23: 11%) each year to result in an impairment.

Cornelian

The Cornelian CGU recoverable amount was calculated as £37,223,000 at 30 June 2024 (FY23: £46,836,000), giving a surplus over the Cornelian CGU carrying amount of £8,416,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of the business. The revenue growth forecasts range between 8% and 9% annually over the five-year period. Revenue growth is forecast using new business targets, expected outflows and estimated impact of market performance on FUM, multiplied by estimated fee yields for both the discretionary and fund management business. Expenditure growth forecasts range between 4% and 9% annually over the five-year period. Both the revenue growth and expenditure growth reflect historic actual growth and planned management actions and are considered to be reasonable in the current market and industry conditions. A pre-tax discount rate of 13% has been used (FY23: 15%), based on the Group's assessment of the risk-free rate of interest and specific risks relating to Cornelian. The recoverable amount was based on the estimated cash inflows over the next five financial years, the period covered by the most recent forecasts, which reflect planned management actions and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds and investment management industries in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

•    An increase of the pre-tax discount rate of 3% (FY23: 6%), from 13% to 16%, would result in an impairment.

•    The perpetuity growth rate would need to reduce by 5% (FY23: 10%), from 2% to (3%), to result in an impairment.

•    The forecast pre-tax cash inflows would need to reduce by 21% (FY23: 28%) each year to result in an impairment.

Funds

Based on a value-in-use calculation, the recoverable amount of the Braemar CGU at 30 June 2024 was £13,602,000 (FY23: £14,463,000), giving a surplus over the Braemar CGU carrying amount of £9,384,000 indicating that there is no impairment. A pre-tax discount rate of 15% (FY23: 16%) has been used, based on the Group's assessment of the risk-free rate of interest and specific risks relating to Braemar. The key underlying assumptions of the calculation are the discount rate, the growth in FUM of the funds business and the long-term growth rate. Forecasted FUM is multiplied by estimated fee yields for each of the funds resulting in forecasted revenue remaining flat over the five-year period. FUM growth is forecast using estimated new business targets, expected outflows and estimated impact of market performance. Expenditure growth is forecast to decrease by between 1% and 3% annually over the five-year period. The inputs to the forecast cash inflows over the next five financial years reflect historic actual growth and planned management activities and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds industry in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

•    An increase of the pre-tax discount rate of 30% (FY23: 28%), from 15% to 45%, would result in an impairment.

•    The 2% perpetuity growth rate could reduce by >100% (FY23: 100%) to trigger an impairment.

•    The forecast pre-tax cash inflows would need to reduce by 54% (FY23: 52%) each year to result in an impairment.

Integrity

Based on a value-in-use calculation, the recoverable amount of the Integrity CGU at 30 June 2024 was £9,335,000 (FY23: £7,725,000), giving a surplus over the Integrity CGU carrying amount of £4,010,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the medium-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 14% (FY23: 15%) has been used, based on the Group's assessment of the risk-free rate of interest and specific risks relating to Integrity. The key input in forecasting revenue is based on new business, which is forecast to grow based on new business targets, attrition and estimated impact of market performance. The revenue growth forecasts range between 8% and 13% annually over the five-year period. Revenue growth is forecast using new business targets, expected outflows and estimated impact of market performance on AUM. Expenditure growth is forecast to increase by between 4% and 6% annually over the five-year period, which includes consideration for reasonable allocated costs. The underlying methodology for allocating costs is reviewed by management each year when preparing the value-in-use calculations to ensure the methodology remains appropriate. In the current year, this resulted in a change to the allocation metrics used within the five-year forecast. The period covered is five years and the forecasts are based on management's growth projections for the business based on its strategic objectives, taking into account historic performance and prevailing market and economic conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds, investment management and financial planning industries in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

•    An increase of the pre-tax discount rate of 8% (FY23: 4%), from 14% to 22%, would result in an impairment.

•    The perpetuity growth rate would need to reduce by 15% (FY23: 6%), from 2% to (13%), to result in an impairment.

•    The forecast pre-tax cash inflows would need to reduce by 36% (FY23: 23%) each year to result in an impairment.

Adroit

Based on a value-in-use calculation, the recoverable amount of the Adroit CGU at 30 June 2024 was £12,854,000 (FY23: £12,121,000), giving a surplus over the Adroit CGU carrying amount of £2,769,000 indicating that there is no impairment. A pre-tax discount rate of 14% (FY23: 15%) has been used, based on the Group's assessment of the risk-free rate of interest and specific risks relating to Adroit. The key input in forecasting revenue is based on new business, which is forecast to grow based on new business targets, attrition and estimated impact of market performance. The revenue growth forecasts range between 9% and 15% annually over the five-year period. Revenue growth is forecast using new business targets, expected outflows and estimated impact of market performance on AUM. The inputs to the forecast cash inflows over the next five financial years reflect historic actual growth and planned management activities and are considered to be reasonable in the current market and industry conditions. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds, investment management and financial planning industries in which the CGU operates.

The Directors do not believe that any reasonably possible change would result in an impairment; however, to provide additional analysis, sensitivity analysis has been performed to show what may be required for an impairment to be recognised.

•    An increase of the pre-tax discount rate of 3% (FY23: 1%), from 14% to 17%, would result in an impairment.

•    The perpetuity growth rate would need to reduce by 4% (FY23: 6%), from 2% to (2%), to result in an impairment.

•    The forecast pre-tax cash inflows would need to reduce by 9% (FY23: 8%) each year to result in an impairment.

b. Computer software

Costs incurred on internally developed computer software are initially recognised at cost and, when the software is available for use, the costs are amortised on a straight-line basis over an estimated useful life of four years, with some specific projects amortised over longer useful economic lives ("UELs") based on their size and usability.

c. Acquired client relationship contracts

This asset represents the fair value of future benefits accruing to the Group from acquired client relationship contracts. The amortisation of client relationships is charged to the Consolidated statement of comprehensive income on a straight-line basis over their estimated useful lives (6 to 20 years).

During the prior year ended 30 June 2023, the Group acquired client relationship contracts totalling £3,156,000 and £2,931,000, as part of the Integrity and Adroit acquisitions, respectively, which were recognised as separately identifiable intangible assets in the Condensed consolidated statement of financial position, with UEL of 15 years.

d. Contracts acquired with fund managers

This asset represents the fair value of the future benefits accruing to the Group from contracts acquired with fund managers. Payments made to acquire such contracts are stated at cost and amortised on a straight-line basis over a UEL of five years.

 

10. Property, plant and equipment


Leasehold improvements£'000

Fixtures, fittings and office equipment
£'000

IT equipment
£'000

Total
£'000

Cost





At 1 July 2022

2,688

741

1,246

4,675

Additions

477

74

194

745

Disposals

(19)

(173)

(474)

(666)

At 30 June 2023

3,146

642

966

4,754

Additions

13

47

23

83

Disposals

(11)

(3)

(3)

(17)

At 30 June 2024

3,148

686

986

4,820






Accumulated depreciation





At 1 July 2022

1,131

513

829

2,473

Depreciation charge

535

102

187

824

Depreciation on disposals

(19)

(173)

(474)

(666)

At 30 June 2023

1,647

442

542

2,631

Depreciation charge

571

95

190

856

Depreciation on disposals

(11)

(3)

(3)

(17)

At 30 June 2024

2,207

534

729

3,470






Net book value





At 1 July 2022

1,557

228

417

2,202

At 30 June 2023

1,499

200

424

2,123

At 30 June 2024

941

152

257

1,350

 

During the year ended 30 June 2024, the Group conducted a review of the property, plant and equipment assets and retired assets from the fixed asset register with a £nil net book value, and no longer used in the business. This resulted in disposals of property, plant and equipment with cost and accumulated depreciation both totalling £17,000.

Property, plant and equipment net book value totalling £1,062,000 at 30 June 2024 are recognised in the United Kingdom and £288,000 are recognised in the Channel Islands.

 

11. Right-of-use assets


Cars
£'000

Property
£'000

Total
£'000

Cost




At 1 July 2022

328

9,425

9,753

Additions

470

713

1,183

At 30 June 2023

798

10,138

10,936

Additions

174

1,125

1,299

Adjustment on change of lease terms

(91)

(315)

(406)

At 30 June 2024

881

10,948

11,829





Accumulated depreciation




At 1 July 2022

37

4,745

4,782

Depreciation charge

158

1,667

1,825

At 30 June 2023

195

6,412

6,607

Depreciation charge

210

1,929

2,139

Adjustment on change of lease terms

50

(192)

(142)

At 30 June 2024

455

8,149

8,604





Net book value




At 1 July 2022

291

4,680

4,971

At 30 June 2023

603

3,726

4,329

At 30 June 2024

426

2,799

3,225

 

The Group offers a car leasing arrangement to provide a salary sacrifice car leasing scheme for employees. Each vehicle leased to individual employees creates a separate right-of-use asset and lease liability measured at present value of the remaining lease payments, discounted using the lessee's estimated incremental borrowing rate (see Note 14).

The property additions relate to six new leases that commenced during the year ended 30 June 2024.

Right-of-use assets net book value totalling £2,823,000 at 30 June 2024 are recognised in the United Kingdom and £402,000 are recognised in the Channel Islands.

 

12. Financial assets held at amortised cost


2024
£'000

2023
£'000

At 1 July

-

-

Additions

29,978

-

Implied interest income

197

-

Contractual coupons received

(212)

-

At 30 June

29,963

-

During the year ended 30 June 2024, the Group invested £29,978,000 in UK Government Investment Loan and Treasury Stock ("Gilts"). The Gilts carry coupon rates ranging from 1.5%-4.5% per annum and have maturity dates ranging from 2026-28. Investments in Gilts are classified as financial assets at amortised cost.

 

13. Net deferred tax liabilities

Deferred income tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. An analysis of the Group's deferred assets and deferred tax liabilities is shown below.



2024



UK
£'000

CI
£'000

Total
£'000

Deferred tax assets




Share-based payments

1,901

-

1,901

Trading losses carried forward

-

147

147

Dilapidations

111

1

112

Accelerated capital allowances

93

-

93

Total deferred tax assets

2,105

148

2,253





Deferred tax liabilities




Intangible asset amortisation

(5,809)

(920)

(6,729)

Accelerated capital allowances on research and development

(918)

-

(918)

Total deferred tax liabilities

(6,727)

(920)

(7,647)





Net deferred tax liabilities

(4,622)

(772)

(5,394)

 



2023



UK
£'000

CI
£'000

Total
£'000

Deferred tax assets




Share-based payments

2,333

-

2,333

Trading losses carried forward

-

363

363

Dilapidations

92

27

119

Accelerated capital allowances

164

-

164

Total deferred tax assets

2,589

390

2,979





Deferred tax liabilities




Intangible asset amortisation

(7,404)

(752)

(8,156)

Accelerated capital allowances on research and development

(856)

-

(856)

Total deferred tax liabilities

(8,260)

(752)

(9,012)

 




Net deferred tax liabilities

(5,671)

(362)

(6,033)

 

The gross movement on the deferred income tax account during the year was as follows:


2024
£'000

2023
£'000

At 1 July

(6,033)

(4,957)

Additional liability on acquisition of client relationship intangible assets

-

(1,520)

Credit to the Consolidated statement of comprehensive income (Note 6)

1,574

779

Charge recognised in equity

(935)

(335)

At 30 June

(5,394)

(6,033)

 

The change in deferred income tax assets and liabilities during the year was as follows:


Share-based payments
£'000

Trading losses carried forward
£'000

Dilapidations
£'000

Accelerated capital allowances
£'000

Total
£'000

Deferred tax assets






At 1 July 2022

2,667

133

65

137

3,002

Over provision in prior years

-

174

-

-

174

Charge to the Consolidated statement of comprehensive income

1

56

54

27

138

Credit to equity

(335)

-

-

-

(335)

At 30 June 2023

2,333

363

119

164

2,979

Credit to the Consolidated statement of comprehensive income

503

(216)

(7)

(71)

209

Charge to equity

(935)

-

-

-

(935)

At 30 June 2024

1,901

147

112

93

2,253

 


2024
£'000

2023
£'000

Deferred tax assets



Deferred tax assets to be settled after more than one year

1,061

1,198

Deferred tax assets to be settled within one year

1,192

1,781

Total deferred tax assets

2,253

2,979

 

The carrying amount of the deferred tax asset is reviewed at each reporting date and is only recognised to the extent that it is probable that future taxable profits of the Group will allow the asset to be recovered. There is an amount of unrecognised deferred tax in relation to capital losses carried forward at 30 June 2024 of £859,000. A deferred tax asset is not recognised in these Consolidated financial statements, nor the Parent Company financial statements, on the basis that it is not probable that capital gains will be available against which capital losses can be offset.

The change in deferred income tax liabilities during the year is as follows:


Accelerated capital allowances on research and development
£'000

Intangible asset amortisation
£'000

Total
£'000

Deferred tax liabilities




At 1 July 2022

389

7,570

7,959

Additional liability on acquisition of client relationship intangible assets

-

1,520

1,520

Credit to the Consolidated statement of comprehensive income

(117)

(934)

(1,051)

Over provision in prior year

584

-

584

At 30 June 2023

856

8,156

9,012

Credit to the Consolidated statement of comprehensive income

62

(1,427)

(1,365)

At 30 June 2024

918

6,729

7,647

 


2024
£'000

2023
£'000

Deferred tax liabilities



Deferred tax liabilities to be settled after more than one year

(6,641)

(7,777)

Deferred tax liabilities to be settled within one year

(1,006)

(1,235)

Total deferred tax liabilities

(7,647)

(9,012)

 

14. Lease liabilities


Cars
£'000

Property
£'000

Total
£'000

At 1 July 2022

292

5,735

6,027

Additions

470

713

1,183

Payments made

(169)

(2,135)

(2,304)

Finance cost of lease liabilities

18

217

235

At 30 June 2023

611

4,530

5,141

Additions

174

1,157

1,331

Adjustment on change of lease terms

(142)

(175)

(317)

Payments made

(225)

(2,311)

(2,536)

Finance cost of lease liabilities

21

174

195

At 30 June 2024

439

3,375

3,814





Analysed as:




Amounts falling due within one year

194

1,975

2,169

Amounts falling due after more than one year

245

1,400

1,645

Total lease liabilities

439

3,375

3,814

 

The Group offers a car leasing arrangement to provide a salary sacrifice car leasing scheme for employees. Each vehicle leased to individual employees creates a separate right-of-use asset (Note 11) and lease liability measured at present value of the remaining lease payments, discounted using the lessee's estimated incremental borrowing rate.

The Group is party to leases as lessee in relation to property agreements for the use of office space. All leases are accounted for by recognising a right-of-use asset and a lease liability at the lease commencement data. Lease liabilities are initially measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate implicit in the lease.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for lease payments made at or before commencement of the lease, initial direct costs incurred and the amount of any provision recognised where the Group is required to dismantle, remove or restore the asset. Additionally, they may be re-measured to reflect reassessment due to lease modifications.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. Additionally, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

If the Group revises its estimate of the term of any lease, it will adjust the carrying amount of the lease liability to reflect the payments to be made over the revised term, discounted at the revised discount rate. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

 

15. Provisions


Client compensation

£'000

FSCS levy
£'000

Leasehold dilapidations
£'000

Tax-related
£'000

Total
£'000

At 1 July 2022

112

386

367

280

1,145

Charge to the Consolidated statement of comprehensive income

579

239

260

-

1,078

Utilised during the year

(441)

(458)

(2)

-

(901)

At 30 June 2023

250

167

625

280

1,322

Charge to the Consolidated statement of comprehensive income

640

691

83

-

1,414

Utilised during the year

(295)

(167)

(268)

-

(730)

At 30 June 2024

595

691

440

280

2,006







Analysed as:






Amounts falling due within one year

595

691

62

280

1,628

Amounts falling due after more than one year

-

-

378

-

378

Total provisions

595

691

440

280

2,006

 

a. Client compensation

Client compensation provisions relate to the potential liability arising from client complaints against the Group. Complaints are assessed on a case-by-case basis and provisions for compensation are made where judged necessary. The amount recognised within provisions for client compensation represents management's best estimate of the potential liability. The timing of the corresponding outflows is uncertain as these are made as and when claims arise.

b. FSCS levy

Following confirmation by the FSCS in July 2024 of its final industry levy for the 2024/25 scheme year, the Group has made a provision of £691,000 (FY23: £167,000) for its estimated share.

c. Leasehold dilapidations

Leasehold dilapidations relate to dilapidation provisions expected to arise on leasehold premises held by the Group, and monies due under the contract with the assignee of leases on the Group's leased properties.

d. Tax-related

Tax-related provisions relate to voluntary disclosures made by the Group to HM Revenue and Customs ("HMRC") following an input VAT review carried out by the Group during FY23.

 

16. Reconciliation of operating profit to net cash inflow from operating activities


2024
£'000

2023
£'000

Operating profit

20,411

21,408




Adjustments for:



Amortisation of intangible assets

7,451

6,832

Depreciation of property, plant and equipment

856

824

Depreciation of right-of-use assets

2,139

1,825

Other (gains)/losses - net

(83)

162

Decrease/(increase) in receivables

4,391

(2,215)

Increase/(decrease) in payables

5,276

(1,526)

Increase/(decrease) in provisions

684

(147)

(Decrease)/increase in other non-current liabilities

(196)

244

Share-based payments charge

2,407

2,686

Net cash inflow from operating activities

43,336

30,093

 

17. Share capital and share premium account

The movements in share capital and share premium during the year were as follows:


Number of shares

Exercise price
p

Share capital
£'000

Share premium
account
£'000

Total
£'000

At 1 July 2022

16,205,542


162

79,141

79,303

Shares issued:






on exercise of options

1,866

1,710.0 - 2,400.0

-

30

30

to Sharesave Scheme

140,171

1,172.0 - 1,704.0

1

 1,660

1,661

of consideration for the acquisition of Integrity

52,084

1,900.0 - 1,920.0

1

 999

1,000

At 30 June 2023

16,399,663


164

81,830

81,994

Shares issued:






on exercise of options

8,554

1,381.0 - 1,725.0

-

135

135

to Sharesave Scheme

35,488

1,172.0 - 1,988.0

1

545

546

of consideration for the acquisition of Integrity

28,748

1,900.0 - 2,174.0

-

625

625

At 30 June 2024

16,472,453


165

83,135

83,300

 

The total number of ordinary shares issued and fully paid at 30 June 2024 was 16,472,453 (FY23: 16,399,663) with a par value of 1p per share.

There was £1,306,000 share capital issued on exercise of options and to Sharesave Scheme members in the year ended 30 June 2024 (FY23: £2,691,000).

Employee Benefit Trust

The Group established an Employee Benefit Trust ("EBT") on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the Group's Long-Term Incentive Scheme; see Note 18(b). At 30 June 2024, the EBT held 421,938 (FY23: 552,633) 1p ordinary shares in the Company, acquired for a total consideration of £19,100,000 (FY23: £16,950,000) with a market value of £8,228,000 at 30 June 2024 (FY23: £11,633,000). They are classified as treasury shares in the Consolidated statement of financial position, their cost being deducted from retained earnings within shareholders' equity.

 

18. Equity-settled share-based payments

All share options granted to employees under the Group's equity-settled share-based payment schemes are valued using the Black-Scholes model, based on the market price of the Company's shares at the grant date and annualised volatility of up to 50%, covering the period to the end of the contractual life. Volatility has been estimated on the basis of the Company's historical share price subsequent to flotation. The risk-free annual rate of interest is deemed to be the yield on a gilt-edged security with a maturity term between seven months and five years, ranging from 0.01% to 2.00%. No options outstanding at 30 June 2024 (FY23: none) carry any dividend or voting rights.

The share options in issue under the various equity-settled share-based payment schemes have been valued at prices ranging from £7.35 to £16.49 per share. The charge to the Consolidated statement of comprehensive income for the year in respect of these was £2,407,000 (FY23: £2,686,000). The weighted average remaining contractual life of all equity-settled share-based payment schemes at 30 June 2024 was 1.36 years (FY23: 1.17 years). The weighted average share price of all options exercised during the year was £18.32 (FY23: £19.34).

A summary of the inputs into the fair value calculations for options granted during the year is set out below.


Long-Term Incentive Plan

Save As You Earn ("SAYE")

Grant date

Various

01/06/2024

Share price at grant

£16.50 - £18.05

£20.60

Vesting period

27 - 51 months

36 months

Volatility

35.34 - 38.06%

38.01%

Annual dividend

4.26 - 4.73%

3.79%

Risk-free rate

3.95 - 4.92%

4.07%

Option value

£14.33 - £16.49

£7.35

 

The exercise price and fair value of share options granted during the year were as follows:


Exercise price
£

Fair value
£

Number of options

Long-Term Incentive Plan

-

14.33 - 16.49

232,851

Employee Sharesave Scheme

14.62

7.35

63,603

 

a. Long-Term Incentive Plan

The Long-Term Incentive Plan was approved by shareholders at the 2018 Annual General Meeting and encompasses annual deferral of bonuses into a Deferred Bonus Plan ("DBP"), Long-Term Incentive Plan ("LTIP") awards made to senior management, and Exceptional Share Option Awards ("ESOA"). Certain ESOA grants carry performance conditions. All awards are subject to continued employment and are made at the discretion of the Remuneration Committee. No awards expired during the year (FY23: 1,452).


2024

2023


Number of options

Weighted average exercise price

 £

Number of options

Weighted average exercise price
£

At 1 July

687,360

-

711,763

-

Awarded in the year

232,851

-

306,603

-

Exercised in the year

(252,507)

-

(168,107)

-

Forfeited in the year

(58,541)

-

(162,899)

-

At 30 June

609,163

-

687,360

-

 

i. Deferred Bonus Plan ("DBP") Awards

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)

Exercise price
£

Vesting period

2024
Number of options

2023
Number of options

2018

-

2019 - 2021

2,694

12,491

2019

-

2020 - 2022

8,278

13,132

2020

-

2021 - 2023

17,071

27,689

2021

-

2022 - 2024

26,619

44,239

2022

-

2023 - 2025

54,931

78,834

2023

-

2024 - 2026

63,107

-

All years



172,700

176,385

 

ii. Long-Term Incentive Plan ("LTIP") Awards

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)

Exercise price
£

Vesting period

2024
Number of options

2023
Number of options

2020

-

2023

-

10,128

2021

-

2024

42,964

44,619

2022

-

2025

55,100

59,088

2023

-

2026

113,878

-

All years



211,942

113,835

 

iii. Exceptional Share Option Awards ("ESOA")

The number of share options outstanding at the reporting date was as follows:

Financial year of grant

Exercise price
£

Vesting period

2024
Number of options

2023
Number of options

2018

-

2018 - 2023

7,460

8,302

2019

-

2019 - 2024

51,208

122,092

2020

-

2020 - 2024

23,449

45,419

2021

-

2021 - 2024

20,626

116,580

2022

 -

2022 - 2025

21,870

7,032

2023

-

2023 - 2026

70,796

97,715

2024

-

2024 - 2027

29,112

-

All years



224,521

397,140

 

b. Long-Term Incentive Scheme ("LTIS")

The Group made no new awards under the LTIS during the year. The conditional awards, which vest three years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three-year performance period. No awards expired during the year (FY23: none). Off-cycle awards were made in 2017 to senior executives to replace awards forfeited from previous employers.


2024
Number of options

2023
Number of options

At 1 July

5,442

5,442

Exercised in the year

(4,298)

-

At 30 June

1,144

5,442

 

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)

Exercise price
£

Vesting period

2024
Number of options

2023
Number of options

2015

-

2018

495

1,077

2016

-

2019

649

1,416

2017 (off-cycle)

-

2020

-

2,949

All years



1,144

5,442

 

At 30 June 2024, options for schemes up to and including the 2017 scheme have vested and are able to be exercised.

 

c. Employee Benefit Trust ("EBT")

Brooks Macdonald Group plc established an Employee Benefit Trust on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the LTIS and LTIP. All finance costs and administration expenses connected with the EBT are charged to the Consolidated statement of comprehensive income as they accrue. The EBT has waived its rights to dividends. The following table shows the number of shares held by the EBT that have not yet vested unconditionally.


2024
Number of shares

2023
Number of shares

At 1 July

552,633

580,806

Acquired in the year

123,918

140,495

Exercised in the year

(254,613)

(168,668)

At 30 June

421,938

552,633

 

d. Company Share Option Plan ("CSOP")

The Company has established a Company Share Option Plan, which was approved by HMRC in November 2013. The CSOP is a discretionary scheme whereby employees or Directors are granted an option to purchase the Company's shares in the future at a price set on the date of the grant. The maximum award under the terms of the scheme is a total market value of £30,000 per recipient.


2024

2023


Number of options

Weighted average exercise price

£

Number of options

Weighted average exercise price

£

At 1 July

16,955

16.37

18,821

16.32

Exercised in the year

(8,554)

15.83

(1,866)

15.89

At 30 June

8,401

16.92

16,955

16.37

 

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)

Exercise price
£

Vesting period

2024
Number of options

2023
Number of options

2013

14.52

2016

-

2,067

2014

13.81

2017

725

2,537

2015

17.19

2018

5,236

9,016

2016

17.25

2019

2,440

3,335

All years



8,401

16,955

 

At 30 June 2024, all options for the CSOP schemes have vested and are able to be exercised. No awards expired during the year under the CSOP schemes (FY23: none).

 

e. Employee Sharesave Scheme ("SAYE")

Under the scheme, employees can contribute up to £500 a month over a three-year period to acquire shares in the Company.

At the end of the savings period, employees can elect to receive shares or receive their savings in cash.


2024

2023


Number of options

Weighted average exercise price

£

Number of options

Weighted average exercise price

£

At 1 July

225,003

15.23

254,111

14.25

Granted in the year

63,603

14.62

161,518

19.35

Exercised in the year

(31,958)

15.77

(143,701)

11.85

Forfeited in the year

(58,186)

15.51

(46,925)

17.21

At 30 June

198,462

14.87

225,003

15.23

 

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)

Exercise price
£

Vesting period

2024
Number of options

2023
Number of options

2020

11.72

2023

-

7,611

2021

17.04

2024

7,882

36,473

2022

19.88

2025

11,772

21,911

2023

14.34

2026

115,205

159,008

2024

14.62

2027

63,603

-

All years



198,462

225,003

 

At 30 June 2024, options for the 2021 scheme have vested and are able to be exercised. No awards under the 2019 scheme expired during the year (FY23: 77).

 

19. Contingent liabilities and guarantees

In the normal course of business, the Group is exposed to certain legal issues, which, in the event of a dispute, could develop into litigious proceedings and, in some cases, may result in contingent liabilities. Similarly, a contingent liability may arise in the event of a finding in respect of the Group's tax affairs, including the accounting for VAT, which could result in a financial outflow and/or inflow from the relevant tax authorities.

A claim for unspecified losses has been made by a client against Brooks Macdonald Financial Consulting Limited, a subsidiary of the Group, in relation to alleged negligent financial advice. The claimant has not yet advised the quantum of their claim so it is not possible to reliably estimate the potential impact of a ruling in their favour. There remains significant uncertainty surrounding the claim and the Group's legal advice indicates that it is not probable that the claim will be upheld; therefore no provision for any liability has been recognised at this stage.

Brooks Macdonald Asset Management Limited, a subsidiary company of the Group, has an agreement with the Royal Bank of Scotland plc to guarantee settlement for trading with CREST stock on behalf of clients. The Group holds client assets to fund such trading activity.

 

20. Related-party transactions

Transactions between the Company and its subsidiaries, which are related parties, are eliminated on consolidation. The Company's individual financial statements include the amounts attributable to subsidiaries. These amounts are disclosed in aggregate in the relevant company financial statements and in detail in the following table:


Amounts owed by related parties

Amounts owed to related parties


2024
£'000

2023
£'000

2024
£'000

2023
£'000

Brooks Macdonald Asset Management Limited

-

239

14,654

-

Brooks Macdonald Asset Management (International) Limited

162

83

-

-

Brooks Macdonald Funds Limited

-

-

900

900

Adroit Financial Planning Limited

-

-

355

-

 

All of the above amounts are interest-free and repayable on demand.

 

 

21. Events since the end of the year

On 11 September 2024, the Group determined the sale of its International business (the International segment in Note 3) was highly probable following the previously announced strategic review. The Group have exchanged contracts for the sale of Brooks Macdonald Asset Management (International) Limited, and its wholly owned subsidiaries for estimated gross proceeds of £50,850,000, inclusive of total deferred contingent consideration amounts, with completion expected by March 2025. The Group and Parent Company expects to make a gain on disposal and no impairment is required. As at 30 June 2024, the sale of the International business was not deemed as highly probable and did not meet the criteria for reclassification to assets held for sale under IFRS 5 as the sale was at its early stages.

Post 30 June 2024, the Group received confirmation from HMRC that its AIM Portfolio Service could be treated as exempt from VAT. As a result, the Group is awaiting a refund from HMRC in respect of VAT arising on those services during the period from 31 December 2019 to 30 September 2023 of £2,249,000. This is being treated as a non-adjusting post balance sheet event.

 

 

Non-IFRS financial information

Non-IFRS financial information or alternative performance measures ("APMs") are used as supplemental measures in monitoring the performance of the Group. The adjustments applied to IFRS measures to compute the Group's APMs exclude income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item. The Board considers the disclosed APMs to be an appropriate reflection of the Group's performance.

The Group follows a rigorous process in determining whether an adjustment should be made to present an alternative performance measure compared to IFRS measures. For an adjustment to be excluded from underlying profit as an alternative performance measure compared to statutory profit, it must initially meet at least one of the following criteria:

•    It is unusual in nature, e.g. outside the normal course of business and operations.

•    It is a significant item, which may be recognised in more than one accounting period.

•    It has been incurred as a result of an acquisition, disposal or a company restructure process.

The Group uses the below APMs:

APM

Equivalent IFRS measure

Definition and purpose

Underlying profit before tax

Statutory profit before tax

Calculated as profit before tax excluding income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item. It is considered by the Board to be an appropriate reflection of the Group's performance and considered appropriate for external analyst coverage and peer group benchmarking. See the reconciliation between underlying and statutory profits section for a reconciliation of underlying profit before tax and statutory profit before tax, and an explanation for each item excluded in underlying profit before tax.

Underlying tax charge

Statutory tax charge

Calculated as the statutory tax charge, excluding the tax impact of the adjustments excluded from underlying profit. See Note 6 of the Consolidated financial statements.

Underlying earnings/ Underlying profit after tax

Total comprehensive income

Calculated as underlying profit before tax less the underlying tax charge.

See Note 7 of the Consolidated financial statements for a reconciliation of underlying profit after tax and statutory profit after tax.

Underlying profit margin before tax

Statutory profit margin before tax

Calculated as underlying profit before tax over revenue for the year. This is another key metric assessed by the Board and appropriate for external analyst coverage and peer group benchmarking.

EBITDA/Underlying EBITDA

N/A

Earnings before interest, tax, depreciation and amortisation ("EBITDA"). Underlying EBITDA is EBITDA excluding income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item.

Underlying basic earnings per share

Statutory basic earnings per share

Calculated as underlying profit after tax divided by the weighted average number of shares in issue during the year. This is a key management incentive metric and is a measure used within the Group's remuneration schemes. See Note 7 of the Consolidated financial statements for the earnings per share.

Underlying diluted earnings per share

Statutory diluted earnings per share

Calculated as underlying profit after tax divided by the weighted average number of shares in issue during the year, including the dilutive impact of future share awards. This is a key management incentive metric and is a measure used within the Group's remuneration schemes. See Note 7 of the Consolidated financial statements for the earnings per share.

Underlying costs

Statutory costs

Calculated as total administrative expenses, other net gains/(losses), finance income and finance costs and excluding income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item. This is a key measure used in calculating underlying profit before tax.

Segmental underlying profit before tax

Segmental statutory profit before tax

Calculated as profit before tax, excluding income and expense categories, which are deemed of a non-recurring nature or a non-cash operating item for each segment. See Note 3 of the Consolidated financial statements for the segmental information.

Segmental underlying profit before tax margin

Segmental statutory profit before tax margin

Calculated as segmental underlying profit before tax over segmental revenue.

Own Funds Capital Adequacy Ratio

N/A

Calculated as the Group's total regulatory resources relative to its Fixed Overhead requirement.

 

 

Finance information

The financial information contained within this preliminary announcement has been extracted from the Group's Financial statements, which have been approved by the Board of Directors and agreed with the Company's auditors'.

 

The financial information set out above does not constitute the Group's statutory financial statements for the years ended 30 June 2024 or 2023. Statutory financial statements for 2023 have been delivered to the Registrar of Companies. Statutory financial statements for 2024 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditor has reported on both the 2024 and 2023 financial statements. Their reports were unqualified.

 

 

Forward looking statements

This announcement has been prepared to provide information to shareholders to assess the current position and future potential of Brooks Macdonald Group. It contains certain forward-looking statements with respect to the Group's financial condition, operations, and business opportunities. Forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is made in good faith based on information available to the Directors as of the date of the statement. Past performance cannot be relied on as a guide to future performance.

 

 

Financial calendar

Results announcement

12 September 2024

Ex-dividend date for final dividend

19 September 2024

Record date for final dividend

20 September 2024

Annual General Meeting

24 October 2024

Final dividend payment date

1 November 2024

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
FR ZLLBFZKLEBBZ